Good day, and welcome to the WPP First Quarter 2019 Trading Statement Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to WPP's CEO, Mark Read. Please go ahead, sir. .

Thank you very much. So good morning, and welcome to our first quarter trading update. This is Mark Read here. I'm here with Paul Richardson, Andrew Scott and Lisa Hau. I'll make a few introductory remarks, and then Paul will take you through the numbers. We'll come back at the end to take questions..

If you turn to Page 2, you can see our safe harbor statement and turn to Page 4 to the introduction. I think that the results really reflect what we set out, I guess, in December and then reiterated at our full year numbers..

We continue to make good progress implementing our 3-year strategy to return WPP to growth. And we talked about in December, some 4 months ago, as we anticipated, the trading in first quarter does reflect the client losses that we had in 2018, particularly in the U.S.

And then if you recall, we came into 2018 only with about $3 billion or $4 billion of billings under review. We were the most under-reviewed holding company, if you like, at the beginning of the year.

And while we were successful in some of the reviews like Shell, we did win other business like Mars and adidas, we did suffer disproportionately from some of those reviews, in particular, Ford, which, while it remains our largest client and we remain their largest partner, did have an impact and a certain of other assignments from clients that you know.

So really, the first quarter, particularly in the U.S., does reflect that..

However, I would say that we go into 2019, first, not with the same level of review. We really have -- as you'd expect in our business, some business up for review as we always do with clients but certainly not with the same number we saw a year ago.

We have had a steady series of good client wins in the last 4 or 5 months, and we have had no major losses. As Paul will show the table of wins, there are no losses that meet the same criteria. So I think we are seeing good stability in our client base. As a result of this, we're not changing our guidance for the full year.

And Paul will talk you through the detail of that..

I would say [ the set ] of our strategy, the newly formed agencies are showing initial signs of success in new business, which is what's most critical. And most recently, Wunderman Thompson won the Duracell creative business. VMLY&R team has come off with strong start.

It won $25 million in new business in the first 3 months, $50 million of new business revenue in the first 6 months. And it does give us strong confidence it's the right decision. And BCW [indiscernible] [ kind of worked ]. Those had a really strong start from a new business perspective in the first year.

And Donna and her team are really doing a great job in bringing that new agency together..

structure, where bringing Wunderman and JWT together, VMLY&R together, Burson Cohn & Wolfe together, realigning the health care businesses to really giving us the right structure for the company in the U.S.

We have been looking at leadership, and actually, if we look across what we've done in September, have made a number of changes in our leadership. Obviously, the combination of VMLY&R and Wunderman Thompson, put different people in charge, brought Shane Atchison in to run the business in Wunderman Thompson North America.

Tim Castree has been moved to run GroupM in North America. In Kantar, we recently hired Reed Cundiff to run Kantar North America. And you take that together, around 75% of our revenues in North America have new leadership since September. And we are continuing to focus on making the right investments, particularly in creative talent.

As I've said before is WPP's critical differentiator and really critical to what we need to do to invest in the business. So I think that's how we see the first quarter. I know it's early days in the year, but we see things at the moment progressing as we anticipated early in the year or back in December..

Now I'll hand over to Paul to take you through the numbers in more detail. .

Okay. So thank you, Mark. I'm now on Slide 6 with the first quarter 2019 highlights. The reported revenue was GBP 3.6 billion, up 0.9%. But on a like-for-like basis, revenues were down 1.3%. An even more meaningful metric, our revenue less pass-through costs number was GBP 2.9 billion in the quarter. And on a like-for-like basis, they were down 2.8%..

North America saw like-for-like revenue less pass-through costs down 8.5%. It was our weakest-performing region, although it was in line with our budget. And as Mark has mentioned, this is due to continued pressure and the impact of losses on assignments in automotive, pharmaceutical and FMCG in the latter part of -- throughout 2018..

In the U.K., we saw like-for-like revenue less pass-through costs down 0.9% in the quarter, a slight decline from the 2018 full year performance, which was down 0.5% in the U.K..

In Western Continental Europe, we saw like-for-like revenue less pass-through costs down 0.2% or broadly flat. There was strong performance in Belgium, Denmark, Finland, Netherlands and Turkey in the quarter, although Austria, Italy and Spain were more challenging this quarter..

In Asia Pacific, Latin America, Africa, Middle East and Central and Eastern Europe was our strongest-performing region with like-for-like revenue less pass-through costs up 2.3% and strong growth coming through particularly in Latin America, Central and Eastern Europe and Southeast Asia. Australia and New Zealand remained more challenging..

There was a significant reduction in the average net debt to the first quarter, down from GBP 4.9 billion a year ago to GBP 4.2 billion this quarter, a reduction of GBP 712 million on average in the first quarter at constant 2019 exchange rates..

Turning now to Slide 7. When I look at the revenue less pass-through costs versus prior year, as I mentioned, the like-for-like decline was 2.8%. Acquisitions added 0.5%, and foreign exchange is positive and helpful by 1.6% in the quarter, leading to a reported revenue less pass-through costs number of minus 0.7% for the quarter..

On Slide 8, when I look at the impact of foreign exchange on revenue less pass-through costs for the full year, it is broadly neutral, as you can see.

It's a benefit of tailwind in the first quarter and in the first half and slight negative towards the second half, but broadly, at current exchange rates, expected to be neutral on a full year 2019 basis..

Turning now to revenue less pass-through costs by region. And taking our GBP 2.9 billion for the quarter, North America generated GBP 1.043 billion of revenue less pass-through costs. It's roughly 36% of the group. As I mentioned, it was down 8.5% in the quarter.

It was worse than the fourth quarter last year trading rate, which was minus 5.7%, and also worse than the full year 2018 number of minus 4.2%..

In the United Kingdom, which generated GBP 400 million of revenue less pass-through costs or approximately 14% of the group, as mentioned, we were down 0.9% in the quarter, actually better than the fourth quarter rate in the U.K. last year of minus 2.7% and pretty consistent with the full year rate 2018 of minus 0.5%..

In Western Continental Europe, which generated GBP 616 million of revenue less pass-through costs in the quarter, around 21% of the group, broadly flat, as we mentioned, minus 0.3%, slightly below the full year rate of 2% growth last year..

In Asia Pacific, Latin America, Africa, Middle East and Central and Eastern Europe, which generated GBP 867 million of revenue less pass-through costs in the region, around 30% of the business, grew at 2.3% in the quarter, consistent with the growth of 2.6% in the fourth quarter last year.

Particularly strong growth came through in Latin America, which was 8%; Central and Eastern Europe, which was 5%; and in Asia Pacific, which was 1.4% overall..

When I look at that in more detail on Slide 10, we've broken out the 7 regions for you showing both the full year '18 pro forma revenue less pass-through costs number and the first quarter 2019 run rate for each of these 7 regions. As I mentioned, we talked about North America.

I've mentioned how strong Latin America was both first quarter this year and last year. U.K., as I mentioned, was down 0.9% in the first quarter, consistent with full year '18 of minus 0.5%. Western Continental Europe, again, 0.3% flat this year compared to a 2% growth last year.

Central and Eastern Europe, very strong, 5% this quarter following a 7% growth last year. And Asia Pacific reasonably consistent at 1.4% this quarter with a full year rate 1.2%. So overall, the mature markets were down 4.7% in this quarter, and the faster-growing markets, as we have defined them, were growing at 2.3%..

If I take the major markets on Slide 11, we show you the full year rates and the first quarter rates, as we explained. This is just for the U.S.A, very similar figure to North America. The U.S.A. is down 8.8%. Again, we are expecting the trends to improve in the second half of the year as the losses flow through our business..

In the U.K., relatively consistent growth. And again, we are expecting a second half modest improvement coming through in the U.K. in the second half in the -- of the year..

Germany off to a relatively modest start at plus 0.4%. It was against a weak comparator, but we are expecting growth to come through in Germany on a full year basis..

China off to a strong start. Rate in China is 4.5%, and you will see Mainland China [indiscernible] even stronger and expecting portfolio growth on a full year basis from Greater China and particularly Mainland China..

France off to a slightly weak start, 1.5% down in the first quarter but looking to have growth in the full year in 2019..

So turning now to Page 12. We break out both Mainland China, which is slightly stronger, as I mentioned, at 6.6% growth in the quarter, looking for good solid growth on a full year basis, slightly stronger than the Greater China number that's growing at 4.5%..

Brazil continues to be very good for us [ after meeting ] 6% growth last year, 8.6% in the first quarter and expecting to be strong all year..

And India has really accelerated its growth from 5.5% this year to 9% in the quarter and expecting to be very strong on a full year basis in India as well..

Russia is always choppy. Quarter 1 was down 1.1%. Expecting this full year to be stronger like last year. It was up 1.3%..

So turning now to revenue less pass-through costs by sector. And looking first at the advertising and media investment management sector, which generated GBP 1.2 billion of revenue less pass-through costs, approximately 43% of the group's revenue from this area. Like-for-like was down 4.8%.

It was weaker than the fourth quarter of last year, which was down 1.6%..

In data investment management, which generated GBP 456 million of revenue less pass-through costs in the quarter, approximately 16% of the group, was positive on a constant currency basis by 0.3%, which includes acquisition, and on a like-for-like basis, plus 0.1%, stronger than the fourth quarter run rate of minus 2% for Kantar in the data investment management business this year.

Particularly strong performance coming through in Asia Pacific, Latin America and the Middle East..

In public relations and public affairs, generating GBP 270 million revenue less pass-through costs in the quarter, approximately 9% of the group, broadly flat or down 0.3% in the quarter, lower than the fourth quarter run rate of nearly 2%.

And again, we did have good growth in Western Continental Europe and the Middle East, with some difficulties in some of our specialist PR companies in certain markets at the start of the year..

In our brand consulting, health and wellness and specialty communications business, generating GBP 956 million of revenue less pass-through costs, approximately 32% of the group. We were down 2% overall and with some difficulties in our health and wellness sector, as we mentioned in our opening remarks..

So turning now to new business line. There is a more positive and encouraging story coming through. So this is the trade estimates of new business wins on Slide 14. And you can see both the mixture of creative and media and interestingly 4 wins specifically on China coming through, 1 in India.

So strong business coming through in our Asia Pacific region, particularly on the media business. Some good global wins in creative as well. And as Mark mentioned, there are no trade estimate, the losses occurring in the first quarter of greater than GBP 42 million..

When we look at our own internal estimates of new business won, and I go back a couple of years, you'll recall that actually a strong quarter for us was a win rate of over $2 billion, which is what we did achieve in this quarter 2019, of which 1/3 of it came out of the U.S.A.

And so when I go back to '17, our total billings won in 2017 was in the order of $6 billion. And in 2018, it was in the order of $4 billion with a real weakness in the second half of last year. So it is a good business momentum indicator of how we're doing in terms of the net new business wins.

And at $2 billion in the quarter, it was as strong as we have been historically..

So turning now to net debt at the 31st of March. Looking at the average for the first 3 months of this year at GBP 4.163 billion compared to the average of the first quarter of last year at GBP 4.875 billion, a reduction of GBP 712 million at constant exchange rates, a good improvement year-on-year.

Likewise, in the point-to-point net debt 31st of March at GBP 4.6 billion compared to 31st of March 2018 of $5.5 billion, a reduction on a constant exchange rate of GBP 876 million..

So looking at the use of cash flow on Slide 16. You've got the full year number shown in -- on the right-hand side of 2018. And in terms of acquisitions and disposals, our goal is to be broadly neutral in the next 3 years in terms of what we acquire versus disposal proceeds that we can generate.

As you saw last year, 2018 acquisitions totaled GBP 288 million for the full year, and disposals totaled GBP 849 million. If we look at March year-to-date, acquisitions totaled GBP 18 million, and disposals total of GBP 179 million.

When you add the GBP 849 million of last year and GBP 179 million of this first quarter, we are now over GBP 1 billion of disposal proceeds generated since the [indiscernible] started..

Turning now to the other factors, share buybacks. We have these, and we will not be buying back shares until the leverage seems to come down. And in terms of headroom on banking facilities, we are strong at over GBP 3 billion..

The other point I think I'd mention is the target range of average net debt to EBITDA is on the pre-IFRS 16 basis. It still remains at 1.5 to 1.75 to be achieved by the end of 2021. At the half year, we will update this range for the IFRS adjustment. So we'll give you more color about what the new metric is in new money at the half year trade..

Again, on 17, just turning to disposal proceeds, the GBP 179 million was GBP 22 million of sale of investments and associates and GBP 157 million generated from the sale leaseback of properties at 3 Columbus Circle in New York City in this quarter..

And so in terms of the financial outlook for this year, like-for-like revenue less pass-through costs of between 1.5% to minus 2%. So that's minus 1.5%, minus 2%, with stronger headwinds in the first half due to client loss assignments in the latter part of 2018.

The headline operating margin down around 1 margin point on a constant currency basis, excluding the impact of IFRS 16 on leases..

And with that, I'd like to hand over to Mark on the progress on our strategy. .

Thanks, Paul. So turning to Page 20, just to briefly recap the strategy that we outlined in December. I think it's worth reminding ourselves the challenges we faced do go back a number of years. Our last quarter of growth in North America was in 2016, so it will take time to turn the ship around.

But the plan that we set out, I think, is intended to systematically address our issues, make WPP more competitive and return business to growth. We started this strategy of radical evolution and with 5 elements to it..

The first, we laid out a new vision and offer at the company as a creative transformation company with an expanded offer in the faster-growing segments, and not just in communications but also in experience, in commerce and technology and really the offer that clients need to succeed and grow their business in today's world..

Second, the renewed commitment to creativity, which is a great importance to our clients. And I would just observe that the acquisition by Accenture of Droga5 illustrates the importance of creativity to our clients. And it is, to my mind, a validation of our renewed commitment to it..

Thirdly, we put data and technology at the heart of our offer. I'd like to think that creativity is our differentiator and technology is really our growth driver. The more we invest in technology, I think the better positioned we'll be to grow..

Fourth is simpler structure, structure to make WPP more client-centric and easier for our clients to access resources that we have, that's easier to manage and better positions our businesses and also through country managers built on local strengths around the world. So it would be simpler, more client-centric structure..

And then lastly, we want to build a culture inside the group that is open, optimistic and extraordinary and will make WPP a destination for the top talent in our industry, diverse talent in our industry that we really need to do..

So turning to Page 21. How are we progressing? I think that the new strategy is resonating well with clients. I was in a review yesterday with one of our top 5 clients on how we were doing, and I'd say there was strong agreement between us of where we're investing and that we're really building the right WPP to help this client be successful.

So I think that our clients are responding well, and I think we see that to some extent in what I'd describe as a solid new business performance and client stability and have been, as Paul said, a steady series of client wins. Now we do face the challenges we had from 2018, but I think that we need to make WPP sort of fighting fit for the future.

That's what we're doing. We're making progress strengthening the team and bringing in new leadership. Most recently, Reed Cundiff from Microsoft to run Kantar in North America. We made a series of other leadership changes in North America to address the issue there..

In technology, I'd highlight the partnership with Adobe, Microsoft and SAP through their open data initiative that was announced at the Adobe Summit a couple of months ago..

On disposals, we made disposals this -- so far this year of GBP 179 million, including property. That was against the target we laid out of GBP 200 million. So I think we're confident that we will exceed the target, but we continue to show much greater discipline in how we're making acquisitions. There's continued progress on the disposal of Kantar.

We have solid interest, as we say, in the release. I will move into the next stage with a number of partners and expect to be able to update you by the end of the second quarter on where we are on that..

And I'd say the restructuring remains on track. The vast majority of the actions that we laid out in December have now been taken. We're seeing the benefits of that flow through, although they're mitigated by the challenges we face on the top line as well..

So I think to summarize, our focus really is on North America. The impact of the client losses is greatest in Q1 in our budgets. Performance in North America does get less bad as the year goes on. Unfortunately, not good, but I'd say less bad. And we are committed to making changes that we need to make..

I think I'll stop there and turn it over to questions. .

Hello, operator, can we now open the line for questions, please?.

[Operator Instructions] We will now take our first question from Adrien de Saint Hilaire of Bank of America. .

So I'd like to kick off please with the question around organic sales growth. In your presentation, Paul, you highlighted that a number of countries would have better growth in the balance of the year.

Now [ ease ] your comparators aside, what sort of visibility do you have of a pickup in growth in the second half? And what do you expect the H1 exit organic sales growth to be?.

Obviously, we have just received a latest forecast with 3-month actuals and 9-month forecast about the year coming, which hasn't been reviewed but we have received it. It confirms that the second half does get stronger through a number of regions actually.

I'd say particularly in Europe, they believe that the growth is returning more consistent to what we saw last year in Europe rather than the sort of flat performance we saw in the first quarter. It is reasonably constant feature of our budget this time of year where the split between the various quarters can shift.

But what I'd say is that there is complementary momentum that the second half will be stronger, obviously, did not [ lift ] because some of the client losses are washing through. And there are some good performances in our business in the second half, which are expected to be achieved. Again, it's still early days.

And if you remember that we have now motivated or incentivized our management as part of their incentives on a net sales target to perform better than they had all originally budgeted. The danger with all these numbers as always is there is a certain amount of new business assumed in the second half to be won and achieved.

And whilst momentum is good today, that obviously is always the sort of slightly unknown factor. But I'd say it's a fresh forecast. It reconfirms what the original budget was about a stronger second half. It is really across a number of regions across all markets, to be fair, but although some of the markets are quite strong today.

But again, it does have a degree of new business consistent with last year that has to be one and done. So that's how I'd respond to that one, Adrien. .

And on the point about H1, exit organic sales growth?.

I don't think we want to be particularly drawn on a quarter-by-quarter approach, if we're honest. Let's see what we deliver. .

All right. Okay. Now I'll move to another topic then. Mark, you highlighted that Accenture bought Droga5. Yesterday, we heard Capgemini saying they want to make a bigger push in digital marketing.

I mean can you talk about the friction between agencies and consultancies? Is that heating up again? Are you seeing them more in pictures? Do you see expect more competition from these guys?.

I think I've said consistently since I took on this role before that increasingly, we will compete with the consulting firms. I think it is. It remains more the margin than at the heart of our business, but I think we will still compete. And there will be times when -- many times when we win, and I'm sure there will be some times when they win.

So I think that -- I mean I'd make one observation. I think it's ironic that when we're in the industry, it seems to be very unattractive. And when consulting firms are in the industry, it seems to be very attractive. I don't totally follow that. And I do think we have very strong skills in technology that enables us to compete with them.

We built [indiscernible].co.uk. where we're re-platforming all of these [indiscernible] business. And we have strong technology capability that I think when combined with our understanding of consumers and marketers and CMOs is very powerful to clients.

So I think that we have a lot of capabilities across the group, and it's a question of releasing it as much as anything else. .

Okay. And perhaps the last shifts happening in the industry, I mean we saw 2 of your competitors in the last 6 months making big moves around data ownership.

Can you share your thoughts around this and the need for WPP to be a data owner given that you're in the process of sending parts of Kantar?.

Yes, look, I think -- well, firstly, I think that the -- firstly, the data that Kantar owned and the data [ that ] Epsilon were actually in a [ upload ] are very different data sets. So I think data is critical to our business, but my observation is that they can be very different data sets.

I think the second observation would be that we bought KBM, which is now Wunderman Data, in 1999. And we bought -- if you look at Epsilon, part of the Epsilon business is instituted for marketing business when we acquired 24/7 Real Media in 2007 12 years ago. So we've had those technologies within WPP.

In one case, for 12 years; in one case, for 20 years. I do think and part of the reorganization we're doing and part of the reason to have a seat here to have Stephan as our CTO and investments we make in technology that we need to make those capabilities more widely available across the group. There's more than we can do.

But I also believe that we have a lot of what we need in those areas. We have a big initiative going on to migrate our customer data management platform to the cloud.

And actually, in some respects, having a relatively small -- our businesses in those areas are smaller, but having a relatively small business does make it to some extent more flexible, and we have less legacy assets in those areas sitting on sort of traditional boxes in server rooms.

So I think that we can push further more aggressively into the data area. We are the leader in our industry, and I think we have a lot of the capabilities that we need to be successful. .

Our next question is from the line of Tim Nollen of Macquarie. .

I've got a couple of questions also on organic growth, please. First, you mentioned -- we know about the account losses that you've been going through the last few quarters hitting the revenues now.

Can you speak a little bit about the underlying core client spending in the U.S.? I think I understood from your reporting and your release about some weakness in auto, pharma and FMCG. Maybe you can speak about the underlying core spending from existing clients, please. And then appreciate the $2 billion net new business figure.

Why the turnaround in that? It's a very impressive number, I think, for the quarter. And if you could comment a little bit on scope of work, pricing, that sort of thing, what helps you to win those accounts, please. .

Yes. So I think on organic growth, if we just focus on North America, our business in North America has been -- the organic growth in North America had been like negative around 3% for the last 2 years. And I think that's a result of specific issues and client weakness.

And I'd say that kind of structural level of organic growth -- negative organic growth has rolled into 2019, if you want to think about it that way. And that would take time to address. And on top of that, you overlay the impact of the client losses in Q1 in North America. So I think that's the way to think about it. .

And our job is, assuming we don't lose more clients, that we run through -- our client losses will finish. And then we have to address and invest in the business to take the underlying negative minus 2% to 3% to positive 2% to 3%, to be simplistic about it.

I think on the net new business figure, it was a good number for the quarter, but it's at our traditional rate. And as you know, we need to continuously win new business because assignments do finish. And the nature of our industry is that part of it is project-related.

So I think it's become a little bit more project-related probably the last 2 to 3 years, for saying over last maybe 3 to 5 years you're seeing more volatility in that. So we need to continue to win that to prime the pump..

But I think in some respects, it's been driven both by a steady series of wins that I don't think there's anything particularly major for us or indeed for anybody else out there in the first quarter of the year.

It's steady series of new assignments that, I'd say, we find reassuring, albeit we do recognize the challenges we need to have to make the numbers for the year. And our guidance does remain unchanged for the year as a whole. So I think the way to think about it is reassurance, but we shouldn't get carried away. .

Sure. That makes sense. Would you mind if I squeeze in one more question, please? It's somewhat related on the organic growth. Facebook had some comments on their earnings this week about some regulatory changes coming that was rather surprising to me that they say it might affect their targeted marketing business in the second half.

They actually pointed to GDPR as having a cumulative effect on their business now and without getting into the details on it. I'm just curious have you seen anything like that. And is there any comment on regulatory change coming, I guess, more in the U.S.

as well as Europe that might affect your business in any way?.

Yes. I mean I don't think we've seen any impact regulatory changes had on -- that's had an impact on the aggregate level of spend.

I think if there's been an impact, it's been on what channels it goes to, and it's tended to favor the incumbents or it's tended to favor those companies that have a first-party relationship with consumers, primarily Facebook, Google, but also Twitter over those companies that are more kind of intermediaries in the advertising business.

But we haven't, I'd say, seen a particular impact on overall levels of digital spend from what we're talking about. And I think you saw Facebook's comments yesterday that actually their top 20 -- their top 100 advertisers represented sort of diminishing proportion of their overall business as the, sort of, so-called long tail is growing. .

Your next question is from the line of Julien Roch of Barclays. .

First question is on disposals. You said you're confident you'd beat the GBP 200 million target this year as you've already done GBP 179 million. But what does confident mean? Are we talking GBP 250 million? Are we talking GBP 500 million? Some color on the expected level of disposal this year. That's my first question.

The second one is on client spend.

I don't know whether you want to do it on your top 10 or your top 25 clients, but how much of revenue is either top 10 or top 25? And then there's some example of large clients, CPG, FMCG like P&G or Unilever actually giving numbers that they have cut agency fee in the range of 20% to 30% as mix of in-housing, change in creatives, things like that.

So what percentage of your either top 10 or top 25 client has gone down that route? And what percentage do you think have not done [ ETL ] but will follow a similar path is my second question. And then the third one is any of your large clients talking about in-housing. .

Okay. So I think on the disposal question, I'm not going to give you a number, but I'd say if your range of GBP 200 million to GBP 500 million, it will be closer to GBP 200 million than it will be to GBP 500 million, if you like. But I think there's a little bit more we can do during this year..

On client spend, I think the way to think about it is how we take on new offer across communications, experience, commerce and technology and use that to grow with clients. And I think that where we are seeing clients which use their spend on agency fees, that tends to be in the institutional areas.

And what we need to do is capture the increase in the other areas. And that's what our strategy is intended to do. And so I think you are seeing sort of structural changes in fees in number of FMCG companies, but what we need to do is capture the growth. And in some cases, we're doing that. In some cases, we're working with on how to do it..

I think on the in-house question, I've said before. I think clients will be better served by partnering with their agencies to do -- bring the resources closer to home if they wanted to do that. And I think clients are better focused on the strategic questions than on execution by trying to build these capabilities in-house.

A number of times we are building those capabilities for them in some cases on site, in some cases in partnership with them. And I'd make the observation that even some clients that have so-called in-house their resource, they've actually done with a partner. So we are working with a number of our clients on that.

And I think that whilst there's more press coverage of the topic, I don't think the numbers you see today reflect anything to do with in-housing, though there are cases where we've done well by doing that with clients. .

Your next question is from Lisa Yang of Goldman Sachs. .

Just a few questions, please. I understand you don't -- no longer provide comment or quantify the performance by months in April. But just wondering like if you can maybe give us some color in terms of what you're seeing in April.

And also, if you think about Q2, I mean how should we think about the moving parts, especially in terms of like the count losses, maybe performance by region? And lastly, you mentioned there are a number of new businesses that you have built in your full year organic growth performance. I was wondering how big of a delta does that represent.

And do you think that's rather conservative? Are the assumption built in rather conservative?.

Look, we're not going to give monthly numbers, and that [ wait ] hasn't even finished yet. So we'd struggle to give it to you for April, even if we were going to. I think that we said what we're going to say about second quarter, which I think is that we anticipate the first half will be tougher than the second half.

And so I think you have to take what we've done in Q1 from what -- and structure that in your own mind what would happen in Q2. I think what I would say is that our numbers -- we do anticipate this being the worst quarter in North America based on our current budgets..

In terms of degree of confidence on new business, I'd say we have about as much business to win in 2019 as we had in 2018 at this stage in the year. And so that's what we need to do, and that's what everyone is sort of focused on doing.

There's -- all of new uncertainties in the world around the economy and Brexit and everything else, but at this point we're not changing, as Paul said, our guidance for the year. So I think that's the way to think about it. .

Your next question is from the line of Matthew Walker of Crédit Suisse. .

Just a few questions, please. The first one is on Kantar timing. So you said it's in Q2 when you will let us -- give us an update on the sale.

Can you -- does that mean that it's going to be before the end of June? Or are you talking about basically anywhere within the scope of your -- when you report H1 results? And then the second one is on the phasing, just help us with the phasing of the losses.

So when you phase the losses through and you get a better second half than first half, when are these losses actually beginning to impact? Do they begin to impact a bit in Q4 to the extent that, that means you've got less impact in Q4 this year? Can you just explain a little bit more about the phasing of the losses through the year, and why they are less in the second half? And then, finally, just on -- finally a final question is just on Kantar and the data.

Somebody asked a question earlier on about the data in Kantar.

Can you just explain a bit more about what your plans are to retain access to the data? What kind of data is -- it is? And how that data compares with Epsilon and Acxiom?.

Yes. Okay. Why don't I take the data question first and then the losses question second to that. Andrew can address the process. On the data front, the data that Kantar has is very broad and very valuable to clients, but tends to fall into 2 categories. One is sort of insight, so projects that are commissioned to solve particular problems.

And the second are panels largely around consumers' purchases and media consumption. Whilst those are linked to the individual consumers, they wouldn't qualify as what I'd call PII.

The data that we have inside Wunderman data in the databases that we've historically [ been ] I-Behavior and the [ Maryland ] PII, they are commission-based data linked to individual things at a granular census based level in the U.S.

So you have data on around 250 million households in the U.S., around 3,000 data sets, demographics, to purchases at SKU level. And we have the ability through our matching to integrate that data from other sources.

So I'd say that the Wunderman data set is a different data set from the Kantar data set, more akin to what you see in Epsilon or Acxiom or Purple..

On the losses front, I think that if you think back to the year, a number of losses took place in Q1 like Marriott, in Q2 like HSBC. So I think you've seen the performance of the U.S. get -- and then not restricted to the U.S., they come out obviously. You see the performance in the U.S. was not good in Q4.

And as I said, we see that start to tail out over the course of the year. Andrew, do you want to take the Kantar... .

Yes, I mean on the process, as we said, we're exactly where we expected to be at this stage. You set out with the timetable and a plan, but nothing is completely guaranteed. It's a big global business. We've got multiple parties that have gone through into a period of detailed due diligence.

So our base plan would have, by the end of Q2 us, hopefully, being able to say something. But that could easily slip by a couple of weeks. So as you indicate, coming back to you by the interim results would -- is entirely possible rather than by the end of Q2. So we kind of have a base plan. We're on track with that plan.

But as you can imagine, it's a big complicated process, so there's no guarantees in it. .

And your next question is from the line of Richard Eary from UBS. .

Just a number of follow-up actually questions. Firstly, just on Kantar. Can you just elaborate in terms of when you -- obviously, you'll do an announcement in Q2.

When do you expect we'll get proceeds and when do you therefore think we can actually use those proceeds in terms of capital management? And what's the process in terms of an AGM for that sale? So that's the first question. The second question.

Mark, you mentioned that the worst quarter -- but I don't know whether you mentioned the worst quarter in the U.S. is Q2 or Q1. So I just wanted to get some clarity on that. The third question is just on call you were talking about obviously you expect H2 to get stronger.

Are we still of the view that H2 as we exit that the run rate is still negative? Or we expect doing -- the run rate to turn sort of towards more positive in Q4? And then just the last one, just maybe some color. Obviously, the creative win, the GBP 100 million for Wunderman Thompson. That's a reasonably big number.

I just wonder whether you can just walk us through the process in terms of why the client chose Wunderman Thompson and what Wunderman Thompson did different than what Thompson would have done on a separate basis. .

Yes. So I think just quickly on the quarter, it was Q1, not Q2. I think when Paul said better he meant less bad, the way to think about it. On Wunderman Thompson, I think it was a combination of a strong creative idea combined with an understanding of technology in a changing marketplace.

So I think the -- we did have different people on it and different teams on it. And actually, there was a heavy involvement by what I call the former KWT people. [ Tamara ] really led the pitch with the team from Wunderman. So I think it was a good team effort.

Andrew, why don't you take the question on the process?.

Yes. On the -- I sort of mentally have 3 to 4 months after assuming there's an announcement. You'd have a period of typical antitrust authority approvals around the world. It's a big global business, likely need for shareholder approval given the size of the transaction.

So you could think of 3 to 4 months before you're in a position to be completing anything. .

Your next question is from Chris Collett of Deutsche Bank. .

Chris Collett at Deutsche. Actually just 2 sort of country level. One was I wonder if you could just talk a little bit about what's happening in the U.K. since that business still continues to perform reasonably well given the macro backdrop. And also as part of that, did you say in your remarks earlier that you expected the U.K.

to improve as the year went on? Or was that just a comment relating to Western Continental Europe? And then the second sort of country-level question was just about China. Very, very strong performance in the quarter.

Just sort of wondering if we look at sort of quarter-by-quarter, you had a kind of a weaker performance in the fourth quarter of last year. So just wondering is it -- does it sort of make no sense to look at things quarter-by-quarter.

Or is there a generally improving trend within China? Just any comments you can give us about what the direction of travel might be there. .

Look, I think I don't want to get into giving forecast by country, by quarter for the year. But my observation on the U.K. would be that we do have a strong -- we do have a very strong business in the U.K. And it's hard at that level to separate what's happening more generally in the economy from gaining market share versus other things.

So I think we do have a relatively better Q1 than we did in Q4, as you observed, but I think some of that as Andrew referred the companies we have in the U.K..

Actually, the same is true in some respects in China. I think Q4 -- I was in China in Q4. I think there are a lot of fears about trade wars. And I think quite a lot of spending got pulled forward from Q4 to Q3, and I think Q4 was soft as a result. But we have had a good new business performance in China the last few months.

We got a very strong business there. And I think you're seeing that flow through into our -- into the business relatively consistently throughout -- on our current forecast relatively consistently throughout the year.

So I think it could be derailed by a major economic shock there, but I think there's -- again, it comes back down to the strength of the company in China and the relationships -- actually, often a lot with local Chinese clients, which is very positive. .

Your next question is from the line of Steve Liechti of Numis. .

Can you just give us a bit more detail in terms of data investment management? Obviously, it went positive in the first quarter, which, I don't know if it's me, but I can't remember it being so for some time. Is that a turning point as far as you're concerned? I know you referenced Asia Pac and stuff like that better.

But can you see that improving through the year? Or do you think that, that will go into negative again as the year progresses? And then secondly, can you give us a bit more detail in terms of health and wellness, exactly what's going on there? Because I think you referenced that as a reason that, that whole bucket was worse in the first quarter.

Any outlook there and specifics would help. .

Yes. So I'll tackle the health and wellness situation and Paul can talk about Kantar. .

So Kantar, as you remember, we've always tried to stress. It was -- there are some very, very strong performances within the business in Kantar, traditionally outside the insights business, traditionally in the faster-growing markets. And we've had really a continuing success story in Asia Pacific and Latin America in particular for Kantar.

What has held us back is some of the markets in -- mature markets and some of the insight business in those markets.

What you're really seeing in 2019 is an improved performance from our insights business in some of those mature markets, not great, but improving from where it was and still a very strong performance from the fast-growing markets of Kantar. In addition, the non-advertising business had some strong performances as well.

So it's really a combination of that, that has really helped the performance for the first quarter. Again, I think we'll be hesitant to say too much about the full year on Kantar. But obviously, the momentum is good, and we're pleased with the performance to plan this quarter. .

And on health and wellness, I guess, about 18 months, 2 years ago, we combined 3 of our health and wellness businesses, Sudler, Grey Healthcare and Ogilvy CommonHealth into one unit. It just didn't work. I think we lost quite a lot of leadership in the business and some traction who made the decision to realign them with the agencies.

I think since we've done that, they've had a broader access to talent and capability. And I think have -- we now have a stronger offer. And we have been actually quite successful with 2 or 3 pharma clients in the first quarter of this year in winning pitches. So I think the industry is not -- it's a lumpy business.

You have drugs that come off-patent and go on patent. So by definition, it's lumpy. And by definition, you need to continue -- really in an interesting way you need to continue to win to fill the pipeline. Because drugs have a certain shelf life, if you like.

But I think the steps that we've taken to realign the business and put new management in place will have an impact on that over the next sort of -- I described as 9 to 18 months in terms of a timetable. We need to see an improvement there from a competitive perspective. .

Great. And so that's the key driver of that decline? If we stripped out that, I don't know why I had in my head that, that business should be doing probably closer to 2% positive.

I mean is that fair to say?.

Well, I think some of our competition have talked about higher growth rates in that area, so. .

Your next question is from the line of Simon Baker of Societe Generale. .

So two questions, please. One is to again sort of better understand or get clarity on why you're leaving your guidance unchanged at this stage. You had a strong quarter for net new business. I realize there's a lag, maybe 3 to 6 months, before that flows through.

So is it a healthy dose of optimism by your part? Or is it reflecting some other issues on pricing or lag or the structural changes that you referred to earlier? And then, secondly, and maybe related, Paul, you referred to the latest budgets offering us sort of confirmatory momentum for a better second half.

I think, historically, WPP's internal budgetary processes has sort of evolved. The divisions, the operations, so lowballing a little bit and group guidance having to add a bit for being more realistic.

How do those internal estimates versus your minus 1.5% to 2% guidance for the full year compare at the moment, please?.

Yes. I think the guidance for the year is minus 1.5% to 2%, as you said. And we are minus 2.8% in Q1. So I think we've still got work to do if you do the math to get to the guidance. So I think it's right at this point to leave it where it is and recognize that I don't think we're lowballing anything.

I think in terms of operating company budgets, we're not going to have -- we don't have operating company budgets and WPP budgets. We have one budget that we're all responsible for. And I think that's where it is, if you like. So we are where we are on that.

Paul, do you have anything?.

Yes. I think that we always have a healthy degree of caution on anything that's set out 9 months, given it's always our smallest quarter in quarter 1 and our largest quarter in quarter 4. We have done this a number of times. We kind of know how the operating companies behave.

We're obviously very focused on the revenue run rate for new business, the conversion, the soft hiring to match that. And I think last year was not a good year for us, one way or the other, and we had to revise down guidance at the end of the third quarter, which was uncomfortable. So we really don't want to make that mistake again..

The good news is that budgets in the [ QRS ] were very similar in direction and in tone, but albeit it's still a lot to do because know that we're behind the rates that we require to be for the full year. So we are taking that into consideration and looking to reconfirm the guidance about the confidence we have in quarter 2, quarter 3, quarter 4.

So I think our history of doing this, the caution we tend to have, but yes, there's always a degree of variability in our numbers. We try to have a view to make sure that it doesn't -- we don't end up being wrong in terms of our range of guidance that we give you at the start of the year. .

You next question is from the line of Tom Singlehurst of Citi. .

Tom here from Citigroup. A quick one or a couple for you actually. First, very simple. I don't know whether you can do this, but the minus 8.5% in the U.S.

or indeed the overall growth profile for the entire group, can you just split it into what component came from straight losses and what the underlying, underlying figure is? I know that's slightly sort of splitting the asset, but at the same time it will be helpful just to get a sense of that underlying, underlying figure I think that Richard talked about earlier on.

On that front, second question, FMCG, there seems to be some slightly more warm commentary out of the sort of consumer packaged goods and food and beverage sector around the need at least to invest in marketing to drive top line.

Is that having any impact, do you think, on your business in the short term? And then very finally to Paul's point just now. How are you managing headcounts sort of in this environment? I mean, obviously, there is meant to be an improvement or things getting less bad across the second half of the year.

Do you have the confidence at this stage to sort of staff up on the basis of that? Or are you trying to manage it with stable headcount?.

So I think -- I don't want to give you sort of scientific numbers because it's hard to measure, and there seems to go -- there are losses that go one way and gains that go the other. But I think 1/3, 2/3 will be one way to think about the Q1 in terms of sort of underlying versus losses.

I think on FMCG, I think the challenge is less -- client spending less and more of the speed at which they're shifting their budgets and our ability to capture them.

And I'd say there are cases where -- one observation would be food, which is the sector in which Kraft Heinz operate, was one of our better-performing sectors you'll see in the appendix to the release. And I do think that a number of clients have said they need to increase spend. But I think that's what we need to work on.

Paul, do you want to tackle the headcount question?.

Well, headcount, we are, obviously, still growing in a number of our businesses, and a number of our regions require headcount to be added. We do have a seasonality factor where we have to be careful, which is the strongest revenue is in the fourth quarter. We tend to be unable to match the headcount in quarter one precisely with our weakest quarter.

So in addition to that, that's a sort of similar issue for each year. The quarter 2 and quarter 4 are the strong quarters. That's where the very good conversion comes. That's where the strongest margins tend to come. So the danger is for the companies.

Whilst they see growth, if they start up too early, they won't get the conversion required in quarter 2 and in the second half..

And our people have learned that, to be fair. And I think our people are being very responsible. So the markets which are down we are seeing quite significant headcount reductions in the markets that are growing within commensurate growth in staff to service that.

So it is sort of done on a micro basis, quite frankly, market by market, business by business. We are very talent -- we are very able to hire talent. There's no -- the business generally hires between 2,000 to 3,000 people every month on a seasonal basis. So there is plenty of churn, I think, to manage the business..

You've got to be very conscious about undersupply of servicing to clients, therefore making sure we have the right staff in place. But the danger is to advance ahead of the revenue curve, and that's the caution we're taking.

So I think people at the moment are being very responsible in terms of the headcount management of their businesses, making sure that they don't overstaff too early in the year. But those businesses that are growing are not short -- are not unable to attract the staff they want.

So it is being managed well, I'd say, at the moment, but we are carefully monitoring it as the year progresses. And obviously, the budgets are an important part of that. And if forecasts were to weaken, obviously, they do have to pull back on any hiring plans they have in the second half of the year.

So know that it's under good control and mirroring the shape of each business unit around the world. .

So you're not putting sort of [indiscernible] sort of top-down no one can hide much more?.

No, absolutely not. No, it's -- that's not the case. .

Thank you. There is no further questions at this time. I would now hand the call over to Mark Read for closing remarks. .

Okay. I've got no further comments, but to thank everyone for their time and look forward to talking to you next quarter. Thank you. .

Or before. Thank you. .

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect..