EX-99.1 2 d727226dex991.htm EX-99.1

Exhibit 1

FOR IMMEDIATE RELEASE |  | 23 April 2019

WPP PLC

Annual Report and Accounts 2018 and Annual General Meeting 2019

The Company has today made available to shareholders the Annual Report and Accounts for the year ended 31 December 2018, Notice of Annual General Meeting 2019 and Form of Proxy. A copy of each document is available to view on WPP’s website www.wpp.com and via the website of the National Storage Mechanism www.morningstar.co.uk/uk/NSM

In accordance with Disclosure and Transparency Rule 6.3.5(2)(b), certain additional information extracted in unedited full text from the Annual Report and Accounts is set out in the appendices to this announcement.

23 April 2019

Appendices

Appendix 1: Management report information

The strategic report to shareholders attached is extracted from pages 2 to 83 of the Annual Report and Accounts and includes an indication of important events that have occurred during the financial year and their impact on the financial statements and the principal risks and uncertainties affecting the Group as at 31 December 2018.

Appendix 2: Financial Statements

The financial statements attached are extracted from pages 120 to 169 of the Annual Report and Accounts and include a responsibility statement on page 126.

Contact:

Chris Wade, WPP

+44(0) 20 7282 4600

END

“THE WORK WE DO FOR CLIENTS HELPS THEM TO GROW THEIR BUSINESSES, BUILD RELATIONSHIPS WITH THEIR CUSTOMERS AND READY THEMSELVES FOR FUTURE SUCCESS.” Mark Read Chief Executive Of?cer As technology reshapes our industry, WPP is undergoing its own transformation. I feel very proud to have been given the opportunity to lead the Company at this important moment in its development. WPP is a great business with many thousands of talented people and outstanding agency brands. We count most of the world’s biggest companies as our clients and we are the largest partner to many of the world’s leading media and technology companies. The work we do for clients helps them to grow their businesses, build relationships with their customers and ready themselves for future success. We have real scale, with strong global creative networks and the number one media-buying operation worldwide through GroupM. We are leaders in major markets like China, India and Brazil, which are important to our clients’ future growth. The amazing work produced by our people, agencies and teams is recognised around the world for its creativity and effectiveness – forging bonds with consumers and delivering tangible business results for our clients. We have a deep understanding of consumers and Chief Marketing Of?cers see us as essential partners in helping to reach them. We also have strong and growing relationships with Chief Information Of?cers and Chief Technology Of?cers, which is vital as data and technology both disrupt and create new opportunities for our clients’ businesses. See our strengths, page 39 WPP ANNUAL REPORT 2018

STRUCTURAL CHANGE, NOT STRUCTURAL DECLINE So I am an optimist about the future of WPP. I believe our industry is facing a period of structural change, not structural decline. Clients are not cutting spend; marketing expense as a share of companies’ revenue has stayed relatively constant over the last ?ve years. But spend is shifting and clients are seeking broader partnerships, well beyond our traditional strengths in commercial creativity. They want much greater insight into media channels and performance, and expertise in data. They want us to connect all of our capabilities together, and put technology at the centre of what we do. See our strategy, from page 42 We are well placed to provide everything clients need, and in a growing number of cases we already do that. However, we need to adapt more quickly to the changing world around us if we are to continue to be successful. Every industry is being disrupted by technology, and ours is no exception. New media channels have proliferated as traditional outlets have declined. Companies like Google, Facebook, Alibaba and Tencent have rede?ned the landscape. There has been an explosion in content to populate the new channels – content that needs to be produced far more cost-effectively than ever before. Ecommerce is frequently driving 100% of the growth for retailers, and our clients are looking for us to be in that space – offering everything from consultancy to the building of platforms and applications, and strategies for working with Amazon. Clients expect us to be ?uent in the language of modern, data-driven marketing. In this new environment, the role of traditional agencies is being challenged. Clients are under pressure due to changes in consumer behaviour. Consultants are becoming more signi?cant competitors. Technology companies are vying with us for talent and attention. And amidst concerns about transparency, privacy, fake news and data security, the industry needs to restore trust among the public, policymakers and clients. See our market, page 36 WPP has substantial assets to help us tackle these challenges. It is an incredible company that has built up a position as a leader in our market. But that market has changed, meaning we have to change as well to continue to deliver results for our clients. Over the years the Company became too complicated, and under-invested in key areas such as talent, creativity and technology. Consequently, WPP has under-performed its peers since the ?rst quarter of 2017, and top-line growth has been hard to ?nd. In 2018, organic growth1 was -0.4%, albeit at the upper end of the guidance we provided in October. The Company performed strongly in Western Continental Europe, Asia Paci?c, Latin America, Africa & the Middle East and Central & Eastern Europe, with the United States more challenging – something we have begun to address through our new strategy. Reported pro?t before tax was down 30.6%, re?ecting the impact of restructuring and transformation costs and goodwill impairment. Dividends per share were 60.0p, ?at with the prior year, and our year-end net debt position improved by £466 million compared to the same date in 2017 (an improvement of £605 million at 2018 exchange rates). See our ?nancial review, from page 54 RADICAL EVOLUTION: A THREE-YEAR STRATEGY To restore WPP to sustainable, pro?table growth, we have begun a three-year plan of “radical evolution” designed to improve performance across the business. We use the term “radical” because of the scale of changes we are making and the tough choices we have to take, and “evolution” because we need to take our people and clients with us on the journey. The ?rst element of the plan is clarifying our vision and offer. The way in which we present ourselves to clients and other audiences has to re?ect the nature and quality of the work we do and the creativity of the people inside WPP. This is something we spent a lot of time on during the second half on 2018 and we were pleased by how well the results were received at our investor day in December. Our vision for the new WPP is to be a “creative transformation company”. Each of those three words is important and carefully chosen. Our clients want our creativity, which is what makes us special and differentiates us from other professional services ?rms. They want us to help them transform their business in a world fundamentally changed by technology. And they want us to be a true company, to work as one on their behalf. Gone are the days when we could operate as a loose federation of independent agencies, overseen by a ?nancial holding group. As well as this new vision we articulated a new, more motivating purpose for WPP: to build better futures for our people and clients. We ?nd this resonates with people both inside and outside the Company, who are pleased to hear WPP express such a positive and con?dent reason for being. 1 Organic growth de?ned as like-for-like revenue less pass-through costs growth. WPP ANNUAL REPORT 2018

STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT “WE REMAIN PASSIONATE ADVOCATES OF BRAND-BUILDING, ITS INCALCULABLE LONG-TERM VALUE, AND OUR CREATIVE AGENCIES’ ABILITY TO MAKE EMOTIONAL CONNECTIONS BETWEEN PEOPLE AND BRANDS THAT LAST FOR A LIFETIME.” That purpose – of building better futures – applies to our wider communities too, and in our sustainability review we talk about the many ways in which we use the power of our creativity to bring about change. See sustainability, from page 60 Our new competitive positioning was developed in consultation with our people and clients, and is supported by a refreshed brand identity – developed by two WPP companies, Superunion and Landor – that you will see reflected in the pages of this report. We are very proud of it, the feedback has been overwhelmingly positive, and I hope you feel the same way. We are also going to market with an improved, simpler offer that re?ects our clients’ needs and allows us to expand in high-growth sectors. The new offer encompasses communications, experience, commerce and technology – each of which is necessary for success for modern clients. See our offer, from page 7 The second pillar of the strategy is a renewed commitment to creativity – putting our most important competitive advantage back at the heart of the business. We are investing an additional £15 million a year for the next three years in creative leadership talent, focused on the United States, which is our largest market and where the investment is most needed. We remain passionate advocates of brand-building, its incalculable long-term value, and our creative agencies’ ability to make emotional connections between people and brands that last for a lifetime. To misquote David Ogilvy, every piece of communication – from the apparently fleeting tactical promotion to the classic “big idea” – should be approached as an investment in the future of a brand. Strong brands, especially in a market disrupted by technology, are the best protection against competitors, the best foundation for premium pricing, and the best guarantee of lasting appeal. Third, we are creating a simpler structure for WPP, to make it more straightforward for clients to access our skills and resources, and more straightforward to run. Three principles sit behind the new organisation: we will be absolutely focused on the needs of our clients in everything we do; we will have fewer, stronger companies, each positioned to grow; and we will have more closely integrated operations at the country level to make best use of our collective strengths. We have already made good progress in simplifying WPP through, for example, the creation of the integrated networks VMLY&R and Wunderman Thompson; the formation of BCW through the merger of Burson-Marsteller and Cohn & Wolfe; the alignment of our US healthcare agencies with integrated agency partners; and the elimination of the sub-holding company WPP Health & Wellness. We have also disposed of 30 non-core investments and associates, raising £849 million to reduce our debt, and accelerated our programme of co-locating our agencies in state-of-the-art new Campus buildings around the world. Fourth, we are making technology and data the engine of our business. Adopting a common strategy for the whole of WPP, we will leverage our unique technology partnerships and make our capabilities in marketing and advertising technology available to all WPP companies for the bene?t of our clients. In my ?rst months as CEO, I have spent a lot of time listening to people across the business and one of the things I heard loud and clear was a desire for WPP to make a statement about its values and the kind of culture we want to have in our Company.

CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT “WE ARE MAKING TECHNOLOGY AND DATA THE ENGINE OF OUR BUSINESS.” Our people and clients rightly expect workplaces that are inclusive, respectful, collaborative and diverse in every sense. If we want to continue to attract the best and brightest, we have to live up to those expectations. So the ?nal part of our plan is to build and champion that new culture – one characterised by our new values of openness, optimism and a commitment to extraordinary work. More broadly, we are placing a greater emphasis on developing talent across WPP, and ensuring we have the right incentive structures for our leaders. Our new Executive Committee, drawn from agency leadership as well as from WPP central functions, will promote a new spirit of collective purpose and collaboration throughout the Company. Further details of the strategy, including the costs and associated ?nancial bene?ts of our turnaround plan, our approach to capital allocation and our new medium-term ?nancial targets, can be found from page 42 and in our investor day presentation on wpp.com. RENEWAL AND CHANGE 2018 was in many ways a turbulent and dif?cult year for WPP, for well-documented reasons. But it was also a year of renewal and much-needed change. WPP is fortunate to have a strong central team that is absolutely committed to the success of the business. We are more fortunate still to have over 130,000 brilliant colleagues in our companies around the world, each of them dedicated to professional excellence in their own discipline. Together we are building a new WPP that will deliver for our people, clients and shareholders for many years to come. Our priority in 2019 is implementing the strategy – continuing to stabilise and rejuvenate the business. Although we face headwinds from account losses in 2018, we have begun the year with con?dence after signi?cant new business wins and the positive reaction to our three-year plan. People in our business rarely have the luxury of looking backwards, and everyone at WPP has their eyes ?rmly ?xed on the future. We have every reason to look ahead with optimism about what that future will bring. Mark Read Chief Executive Of?cer 10 April 2019 WPP ANNUAL REPORT 2018

STRATEGIC REPORT AT A GLANCE OUR GLOBAL BRANDS AKQA BCW Finsbury Geometry Grey GroupM – Essence – MediaCom – Mindshare – Wavemaker – Xaxis GTB Hill+Knowlton Strategies Hogarth Kantar Landor Ogilvy Superunion VMLY&R Wunderman Thompson Clients include 369 of the Fortune Global 500, all 30 of the Dow Jones 30 and 71 of the NASDAQ 100. KEY INDICATORS PERFORMANCE (2018) Billings £55.8bn (2017: £55.6bn) Social investment as a percentage of reported pro?t before tax 1.20% (2017: 0.97%) KEY FACTS AND FIGURES 130,000+ people 112 countries A- rating for our climate change strategy and reporting in the CDP climate change programme Gold in the EcoVadis CSR rating for the fourth year in a row Revenue £15.6bn (2017: £15.8bn) Women in senior management 49% (2017: 49%) Most Creative at the Cannes Lions International Festival of Creativity 2011-2017 Most Effective in the Ef?e Global Effectiveness Index 2012-2018 Industry Leader in the Bloomberg Gender-Equality Index Quoted on the London Stock Exchange and the New York Stock Exchange. Revenue less pass-through costs £12.8bn (2017: £13.2bn) Carbon emissions per person from building energy use (scope 1 and 2) 0.74tCO2e (2017: 0.82 tCO2e) WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR TO CLIENTS OFFER As announced at our investor day on 11 December 2018, our new offer comprises four areas – each of which is critical to success for modern clients. This more contemporary and future-facing offer better serves clients’ needs as they react to the changing marketplace, and expands our own business in high-growth sectors. Focuses on advertising, branding and identity, content, media investment, public relations and public affairs, and healthcare. From page 8 Re?ects the growing need of clients to create new brand, product and service experiences. From page 16 Allows WPP to expand its growing omni-channel commerce business and its work with brands to help them succeed in marketplaces such as Alibaba and Amazon. From page 22 Underpins WPP’s work with both CMOs and CIOs to build and operate marketing technology that supports their consumer- and customer-facing activities. From page 28 The areas of experience, commerce and technology already represent approximately one quarter of WPP’s revenue. Importantly, this is our offer to clients, not our organisational structure. WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR OFFER TO CLIENTS COMMUNICATIONS Our capabilities in advertising, branding and identity, content, media investment, public relations and public affairs, and healthcare give us unmatched breadth and depth in the world of communications. 8 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT We apply vision, imagination and creativity to the task of solving business problems. Our ideas – and the many different ways in which we share them – inspire audiences, build brands and deliver transformative results for our clients. WHAT WE OFFER Advertising/branding & identity/content/ media investment/public relations & public affairs/healthcare OPPORTUNITY Growth is expected to be driven by media (programmatic, search and innovation), content creation, social media/in?uence and healthcare $1tn +/-3% market in 2018 growth in 2018 Source: GroupM – This Year Next Year Worldwide Media Forecast CLIENTS INCLUDE BT Bumble Burger King Coca-Cola Colgate Ford Google IAG IBM J&J Lenovo Microsoft P&G P?zer Tramontina Unilever Via Varejo Vodafone Volkswagen Xiaomi WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR OFFER TO CLIENTS COMMUNICATIONS A WOMEN-FIRST PLAYING FIELD VMLY&R AGENCY BUMBLE CLIENT Bumble is a women-?rst social networking app built around kindness, respect and equality that challenges antiquated social norms by empowering women to make the ?rst move. Bumble wanted to position themselves as not just a dating app, but a network that connects people worldwide, from dating and friendship to professional networking. And they wanted to do it during one of the largest televised events in the US – the Super Bowl. VMLY&R was given the task of creating a commercial that focused on changing the conversation of gender norms. Bumble’s agency of record, FlyteVu, secured a woman known for making bold moves on and off the court, Serena Williams, as the voice for this empowering message. The ad was made by a female-led team, and women everywhere heard the message loud and clear as it became the single most engaged-with commercial on Facebook for Super Bowl 2019. 7.2bn 11.8m earned media views on social impressions February 2019 January 2019- February 2019 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR OFFER TO CLIENTS COMMUNICATIONS WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT CREATIVITY TO DIFFERENTIATE DAVID AGENCY (OGILVY) BURGER CLIENT KING The Quick Service Restaurants industry in the US is one of the most competitive in the world. In a sector dominated by McDonald’s, DAVID helps Burger King ?nd creative ways to punch above its weight and budget. With a challenger mindset born out of Burger King’s brand DNA and position in the marketplace, DAVID takes an unconventional approach designed to generate conversation – from a Google Home hijack to posters of Burger King stores in the process of burning down and the ?rst Super Bowl spot for more than a decade. With campaigns such as Burger King Crown, Proud Whopper, Google Home of the Whopper, Burning Stores, Whopper Sign and Scariest BK, DAVID’s leftfield and contemporary work has consistently delivered value for the client. 50+ 4 Cannes Lions including four for Burger King Grand Prix and DAVID 2015-2018 WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR OFFER TO CLIENTS COMMUNICATIONS 14 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT GOOGLE’S AGENCY OF RECORD ESSENCE AGENCY GOOGLE CLIENT Essence is part of GroupM, the world’s leading media investment company. Its 13-year relationship with Google began with a small engagement and has grown to include the full spectrum of the agency’s offering. As Google’s global digital agency of record, Essence has scaled with Google to meet demand in of?ine media, creative, data science and experiential innovation. At the same time, it has continued to expand its foundation in data-driven, end-to-end campaigns management – from media strategy and planning through buying, ad operations and advanced analytics. Essence is the largest user of Google’s marketing platforms, and partners with its marketing, product and sales teams to realise Google’s ambition of being the world’s greatest digital marketer. Essence has supported each generation launch of the Pixel phone, and driven awareness and sales of products like Home and Assistant from inception. Essence’s work touches virtually every corner of Google, leading campaigns for 48 products in 2018, including core brand services (Search, Chrome, Assistant), hardware brands (Pixel, Home, Nest, Chromebook), entertainment platforms (YouTube, Google Play), B2B (AdWords, Cloud) and several new growth-oriented business lines. The agency has delivered 833 campaigns for Google across 106 countries, representing hundreds of millions in media spend – a ?gure that continues to rise every year as Essence drives quanti?able results for its client. 833 48 campaigns products supporting in 2018 WPP ANNUAL REPORT 2018 15

STRATEGIC REPORT OUR OFFER TO CLIENTS EXPERIENCE Expertise in UX, service design, platforms and applications allows us to create vivid and compelling brand experiences for clients. 16 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT We bring brands to life through engaging, unexpected and interactive experiences. Whether it’s a mobile app, an augmented reality solution or a retailer’s Christmas journey, we design experiences that forge closer and more enduring relationships between companies and their customers. WHAT WE OFFER Customer experience design/ platforms and websites/ mobile applications/ innovation, eg voice, augmented reality OPPORTUNITY Growth is expected to be driven by integration of online and of?ine experience, innovation (particularly in devices) and experiences, eg in-car, product, voice c.$100bn market by 2022 5-10% compound annual growth rate 2017-2022 Source: Exane BNP Paribas CLIENTS INCLUDE adidas Amazon Alibaba Delta Dyson EY Google Net?ix Nike TataSky Verizon WPP ANNUAL REPORT 2018 17

STRATEGIC REPORT OUR OFFER TO CLIENTS EXPERIENCE A UNIQUE ROUTE TO MARKET POSSIBLE AGENCY ADIDAS CLIENT GLITCH adidas GLITCH is a new football boot concept aimed at a new generation of players. To connect with this audience of football creators, POSSIBLE set out to disrupt the category by launching a fully mobile experience and a unique route to market. The GLITCH app is designed to reach young players where they spend most of their time – on their phones, on the move – and connect them to the GLITCH product and the in?uencers who launched the boot. Now live in London, Berlin and Paris, the GLITCH app houses everything in the customer journey from ?rst interaction with the product, booking test sessions and purchasing, right through to delivery in four hours. The GLITCH boots can only be bought through the app. Customer service (from the in?uencers themselves) is built into the app, and users come back again and again post-purchase for entertaining user-generated content. GLITCH is now adidas’ second biggest-selling football franchise online behind Predator, a boot that has over two decades’ history and budgets that are well over 10 times those for GLITCH. Achieved without the usual big budgets, big-name online stores and Premier League football stars, GLITCH has turned the industry upside-down and created a completely new relationship between brand and consumer. >60k 68% downloads in ?rst average conversion of 30 days (across invite to download, with London, Berlin, Paris) peak of 73% in London 20 5 Awards Cannes Lions 18 WPP ANNUAL REPORT 2018

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STRATEGIC REPORT OUR OFFER TO CLIENTS EXPERIENCE ONLY YOUR VOICE WILL SET YOU FREE AKQA AGENCY AMAZON CLIENT Millennials are the biggest adopters of technology, but even they overlook the thousands of capabilities that come with voice-?rst interfaces. Amazon wanted to expose Alexa to this advertising-resistant audience by creating an immersive experience that required an active exploration of its wide range of skills. As the top attraction at New York Comic Con, Amazon Echo Escape gami?ed the smart home by creating the world’s first escape experience powered by voice. Set in the world of Tom Clancy’s Jack Ryan, players exploited Alexa’s capabilities to gain intel, crack codes, control smart-home devices, interact with live actors and ultimately set themselves free. The experience culminated in a Twitch broadcast featuring top gaming personalities CaptainSparklez, Swiftor and OMGits?refoxx. Each tested their wits live while over one million online participants intervened – choosing either to help or hinder their progress. During four days at New York Comic Con, hundreds of attendees used Alexa to escape, while more than 5,000 queued for a chance to play, with reservations claimed within the ?rst hour of opening. 1.5m+ online participants during the three- hour broadcast 5,000+ queued for a chance to play at New York Comic Con 43,000+ gameplay engagements during the three- hour broadcast 20 WPP ANNUAL REPORT 2018

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STRATEGIC REPORT OUR OFFER TO CLIENTS COMMERCE With deep retail experience, including creating direct-to-consumer platforms and helping clients navigate marketplaces such as Amazon and Alibaba, we deliver cutting-edge commerce solutions. 22 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT Today every major business is an ecommerce business – because that’s where consumer spending growth is coming from. We help companies drive sales growth and customer acquisition across all channels, providing everything from site builds to strategic consultancy. WHAT WE OFFER Direct-to-consumer/omni-channel retail/ marketplaces, eg Amazon, Mercado Libre OPPORTUNITY Growth is expected to be driven by grocery, direct-to-consumer, non-retail (eg airlines, banks etc) and marketplaces $9.5bn 15% platform spend growth by 2021 FY 2017-FY 2018 Source: Forrester – Data Commerce Platform Technology Forecast OUR STRATEGIC CLIENTS PARTNERS INCLUDE INCLUDE Adobe Amazon Alibaba Alibaba Amazon Asian Paints Commercetools Audi Google Bank of China IBM Coca-Cola Intershop DFS Salesforce Diageo SAP Illy Shopify Oreo P&G Sainsbury’s Unilever YOOX NET-A-PORTER GROUP WPP ANNUAL REPORT 2018 23

STRATEGIC REPORT OUR OFFER TO CLIENTS COMMERCE AN ENHANCED ONLINE EXPERIENCE WUNDERMAN AGENCY THOMPSON COMMERCE DFS CLIENT DFS, the UK’s leading upholstery retailer, wanted to offer a smarter shopping experience that was seamless and integrated across all customer touchpoints. DFS approached Wunderman Thompson Commerce with this challenge, which centred on building and extending its digital platform. Wunderman Thompson’s solution included moving DFS to a new customisable, scalable platform that was responsive across devices and offered improved ef?ciencies alongside exceptional customer experience. Innovative digital signage in-store helped DFS maximise available store space, while a new dynamic routing system and mobile app optimised the routes and schedules of thousands of orders every day. The solution has improved delivery ef?ciency and arrival time accuracy, as well as creating substantial cost savings. Wunderman Thompson Commerce also helped DFS to become the ?rst UK furniture retailer to offer augmented reality (AR) on its website, allowing iPhone and iPad users to place a piece of furniture in their home and visualise how it looks and ?ts before purchase. Results show that users of the AR feature are signi?cantly more likely to go on and make a purchase. The platform built by Wunderman Thompson Commerce continues to underpin the client’s digital transformation and drive strong growth in online sales. Awards Delivery Initiative Digital Experience, of the Year at the Best Use of Cloud/ Retail Systems Virtual Agents and Best Awards 2018 Omnichannel Experience at the UK Digital Experience Awards 24 WPP ANNUAL REPORT 2018

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STRATEGIC REPORT OUR OFFER TO CLIENTS COMMERCE 26 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT INNOVATING WITH ALIBABA VMLY&R AGENCY OREO CLIENT Oreo needed to grow its brand equity and sales in China. To help it do that, VMLY&R created a whole new ecommerce brand experience. The Oreo Music Box is a mini turntable that plays music when an Oreo cookie is placed on it. The music changes with every bite. VMLY&R led the design, prototyping and commercialising of the Oreo Music Box for scale production, and worked with Oreo to develop a special-edition ecommerce bundle pack. The agency also worked with Alibaba Tmall – the world’s largest ecommerce site – to create a unique user journey for consumers, allowing them to order and personalise their own Oreo Music Box. For launch, VMLY&R targeted Oreo lovers on the Alibaba media ecosystem (social, video and ecommerce) to drive up anticipation, and debuted the product on Tmall Super Brand Day. The Music Box sold out in half a day, successfully elevated the Oreo experience above ?erce category competition, and set a new standard for ecommerce product development in China. ¥1m 46m of sales in social impressions ?rst hour gained over Super Brand Day period, ~1 week WPP ANNUAL REPORT 2018 27

STRATEGIC REPORT OUR OFFER TO CLIENTS TECHNOLOGY Our data management, marketing technology consulting and systems integration services, alongside our unique partnerships with the world’s leading technology companies, deliver value and growth for our clients. 28 WPP ANNUAL REPORT 2018

OUR OFFER TO CLIENTS STRATEGIC REPORT Companies increasingly use technology at the centre of their marketing to create closer connections between their brands and consumers. We consult on, architect, build, integrate and run platforms and applications for clients, and use our relationships with technology companies to offer ef?cient, effective and scalable solutions. WHAT WE OFFER Data management/marketing technology consulting/systems integration OPPORTUNITY Growth is expected to be driven by Adobe and Salesforce practices, agnostic consulting on technology choice and CMO/ CIO alignment $300bn market by 2022 5-10% compound annual growth rate 2017-2022 Source: Exane BNP Paribas OUR STRATEGIC PARTNERS INCLUDE Acquia Adobe Google IBM Microsoft Oracle Salesforce SAP Sitecore CLIENTS INCLUDE adidas DELL Ford H&M HSBC LinkedIn Mahindra Holidays Microsoft Unilever Volvo WPP ANNUAL REPORT 2018 29

STRATEGIC REPORT OUR OFFER TO CLIENTS TECHNOLOGY CURATING MARKETING SOLUTIONS VERTICURL AGENCY LINKEDIN CLIENT When LinkedIn needed a partner to implement its marketing technology vision, they turned to Verticurl. LinkedIn was seeking brand consistency across a diverse business portfolio, the ability to scale marketing operations globally and help managing a high volume of campaigns. Verticurl’s approach curated a suite of marketing solutions, providing a fully centralised operating model, a marketing operations partner with global scale, uni?ed processes and work?ows, systems integration, campaign operations for email and web, and in-region support across approximately 30 markets. The solution, which enables LinkedIn to deliver 2,640 campaigns annually worldwide, has produced an increase in global campaign deployments and a reduction in costs through process automation and platform governance. 17% 22% increase in reduction in costs global campaign January-September 2018 deployments January-September 2018 30 WPP ANNUAL REPORT 2018

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STRATEGIC REPORT OUR OFFER TO CLIENTS TECHNOLOGY PERSONALISATION AT SCALE COGNIFIDE AGENCY FORD CLIENT Ford tasked Cogni?de with the delivery of a seamless global customer experience and the capability to talk to customers individually, but at scale. The initial technical vision was to take the model of ?exible, scalable vehicle production and apply it to web development. Cogni?de created a single platform to equip all European markets with the foundation on which to build their local sites, in their own language, featuring their own vehicles, ensuring the correct speci?cation, legal compliance, consistency across all devices and a joined-up user journey across the sites. All with a globally consistent look and feel. However, web is just one channel in Ford’s mix. The greater challenge was to provide Ford with a single view of the customer across multiple channels to enable them to automatically personalise messaging at scale. Working with Adobe, Wunderman Thompson and GTB, Cogni?de achieved a world ?rst in integrating Adobe Experience Manager, Campaign, Target, Audience Manager and Analytics, stitching together the data and capability required to automate a personalised approach. This innovation, applied to a campaign targeting prospects known to be in the market for new vehicles, saw signi?cant growth in clicks to leads (test drive requests, brochure requests, contact dealer requests) and reduced cost per lead due to platform ef?ciencies. 76% 16% rise in clicks reduction in to leads cost per lead in the ?rst half in the ?rst half of 2018 of 2018 32 WPP ANNUAL REPORT 2018

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STRATEGIC REPORT WHERE WE ARE WPP companies operate in 112 countries. Here we show our presence by region in terms of revenue and headcount. Revenues Denote the collective ?gure for all WPP companies in a given region or country. People Denotes the number of people employed by WPP companies in a given region or country. As at 31 December 2018. 34 WPP ANNUAL REPORT 2018

WHERE WE ARE STRATEGIC REPORT WPP ANNUAL REPORT 2018 35

STRATEGIC REPORT THE MARKET Technology is rapidly reshaping the market in which we operate Spending by clients has stayed relatively constant MARKETING EXPENSE AS A SHARE OF REVENUE But they are looking for a broader, technology-enabled service 29% 2/3 of marketing budget of Chief Marketing allocated to technology Officers’ advertising (2017: 22%) budgets are invested in digital channels 40% 1 in 6 of Chief Marketing Of?cers marketing dollars is say marketing analytics spent on innovation tops their priority list (2017: 27%) Source: Gartner – CMO spend survey 2018-2019 Source: Gartner – CMO spend survey 2018-2019 36 WPP ANNUAL REPORT 2018

THE MARKET STRATEGIC REPORT Our industry is undergoing structural change The role of Clients want our creativity more than ever “ WE CAN’T BE but they are seeking services beyond our NOSTALGIC ABOUT “traditional” traditional strengths in communications. OUR AGENCY Agencies in the industry perceived to be agencies is being lacking in contemporary skills in areas such as BRANDS, AND WE data, technology, experience and commerce HAVE NOT BEEN.” challenged have come under signi?cant pressure. Mark Read Chief Executive Of?cer Our clients are Every industry, from automotive and TRANSACTIONS packaged goods to drinks and ?nancial being disrupted services, is facing structural change driven by technology. We need to help our clients 60% by technology navigate this disruption, and to do so we 40% need to adapt more rapidly than we have in the past. Digital In-store Source: Kleiner Perkins 2018 Internet Trends Report Consultants are Consulting ?rms have expanded rapidly into areas in which we compete, to a signi?cant $2.6bn competing with degree through acquisition. We need to recognise that new competition and be estimated spend of consulting us on technology ready for it. We also need to promote our ?rms on agency acquisitions existing consulting and technology in 2018 and talent capabilities more effectively. Source: R3 Consulting Facebook, Google While their direct competitive threat may be overstated, the giants of the tech industry c.$1.8tn and Alibaba are (Google, Facebook and Alibaba – three of the world’s 10 most valuable companies) are combined market vying for talent vying with us for talent and attention. capitalisation of Facebook, Google and Alibaba and attention As at 26 March 2019 Trust and transparency New platforms are changing the way people interact with technology. Privacy, data and 70% are paramount security breaches and the issue of fake news have damaged trust between organisations of internet users in the UK and and the public. The industry needs to work US are now more concerned hard to restore that trust. about their online privacy than they were 12 months ago Source: Global Web Index WPP ANNUAL REPORT 2018 37

STRATEGIC REPORT THE MARKET This change also provides signi?cant opportunity for companies like WPP These trends are driving our industry towards high-growth areas, in addition to our traditional areas of strength in communications, as re?ected by the four pillars of our new client offer. WPP is already one of the most forward-looking and tech-enabled companies in our industry. We have many of the world’s leading creative, data and technology agencies, ?ve of which were named as industry leaders and visionaries in the in?uential Gartner Magic Quadrant study. We are the largest partner to the world’s leading media and technology companies. We invest $5.5 billion with Google on behalf of our clients, and $2.5 billion with Facebook. And we drove more traf?c to Alibaba on Singles’ Day than any other partner globally. Our marketing technology operation consists of 6,000 experts worldwide, and we have strong, growing relationships with our clients’ Chief Information Of?cers, as well as the Chief Marketing Of?cers. As we increasingly put technology at the heart of what we do, we are well positioned to capture the opportunities of the changing market, and to help our clients navigate the technology-driven disruption they are facing. ESTIMATED GLOBAL MARKET COMMUNICATIONS $1tn market in 2018 +/-3% growth in 2018 Source: GroupM – This Year Next Year Worldwide Media Forecast COMMERCE $9.5bn platform spend by 2021 15% growth FY 2017-FY 2018 Source: Forrester – Data Commerce Platform Technology Forecast EXPERIENCE c.$100bn market by 2022 5-10% compound annual growth rate 2017-2022 Source: Exane BNP Paribas TECHNOLOGY $300bn market by 2022 5-10% compound annual growth rate 2017-2022 Source: Exane BNP Paribas 38 WPP ANNUAL REPORT 2018

STRATEGIC REPORT OUR STRENGTHS Our substantial assets mean we are well placed to capitalise on that opportunity Most of the world’s largest 73.8% We work with 67 companies are WPP clients of the Fortune of the FTSE 100 CLIENTS AND Largest partner to the Global 500 PARTNERSHIPS world’s media and 7 >$8bn technology companies of the top 10 most of media spend valuable brands managed with Facebook in China and Google in 2018 Strong global networks 112 #1 countries in media Media buying scale buying worldwide SCALE Strength in critical $1.1bn >$45bn markets for future, revenues in China annual media investment eg China, India, Brazil managed by GroupM Our most important source Most Creative of competitive advantage at the Cannes Lions International Festival of Creativity 2011-2017 CREATIVITY Partner to the Chief Marketing Of?cer Most Effective in the Ef?e Global Effectiveness Understanding of consumers Index 2012-2018 Growing Chief Information 6,000 Of?cer relationships people in our marketing technology operation TECHNOLOGY Signi?cant marketing technology offer Largest global partner for Adobe, Salesforce, Google, Marketo and Oracle marketing clouds WPP ANNUAL REPORT 2018 39

STRATEGIC REPORT OUR MODEL BUSINESS WPP TRANSFORMATION IS A CREATIVE COMPANY We build better futures for our clients through an integrated offer of communications, experience, commerce and technology WPP is a creative transformation company with a service offering that allows us to meet the present and future needs of our clients. Our business model is client-centric, and we leverage resource and skills across our internal structures to provide the best possible service. WPP works with 369 of the Fortune Global 500, all 30 of the Dow Jones 30, and 71 of the NASDAQ 100. We are committed to the principles of sustainability in business, through our assignments for clients, our substantial pro bono work and the management of our own operations. We aim to build better futures not only for our people and clients but our wider communities. Our networks and agencies operate in all major global markets, offering a range of services across four key areas: communications, experience, commerce and technology. Each of these areas is critical to success for modern clients. By bringing them together WPP can meet clients’ needs as they react to the changing marketplace and complex social, economic, and environmental pressures, while expanding our own business in high-growth sectors. Revenues are principally derived from fees for services on a rate per hour or per project basis. Client engagements include ?xed-fee contracts, retainer agreements and commissions on media placements. Some client arrangements include performance incentive provisions designed to link revenue to quantitative and qualitative goals. We focus on revenue less pass-through costs as a re?ection of top-line performance. Pass-through costs comprise fees paid to external suppliers where they are engaged to perform part or all of a speci?c project and are charged directly to clients – predominantly media and data collection costs. Our people are our most important assets and our ability to attract and retain diverse talent is a critical element of our competitiveness. Compensation and incentives are aimed at making WPP a home for the best and brightest, and are aligned with our strategy for growth. Our delivery model is based on an increasingly ?exible cost structure, with the use of consultants, freelancers and incentives allowing an agile response to any market volatility. Our transformation programme, encompassing a new vision and offer, a simpli?ed structure including a consistent shared service infrastructure and the development of Campus co-locations, investments in creativity, technology and talent, and a new emphasis on building the Company’s culture, will enhance WPP’s proposition to clients and drive top-line growth. 40 WPP ANNUAL REPORT 2018

STRATEGIC REPORT FOUNDATIONS FOR GROWTH During 2018 we focused on a number of short-term strategic priorities, as well as on formulating a new long-term strategy, which was announced in December. At the half year we set out our short-term FOCUS ON OUR CLIENTS INVEST IN TALENT THAT REPRESENTS priorities to put WPP on a solid foundation – Emphasis on providing faster, more agile, more OUR CHANGING WORLD for growth. A number of these priorities effectively integrated solutions for our clients – Formation of new central team with key formed the basis for our longer-term – Wins from clients including adidas, Hilton, appointments including Chief Operating Officer, strategy. In addition to the actions taken Mars, Mondelēz, T-Mobile, Volkswagen Chief Client Officer and Chief Technology Officer – Development of new vision and offer to better – WPP Executive Committee established for the in 2018 outlined here, further details of position WPP with clients first time, drawn from corporate and operating progress can be found from page 42 – Appointment of Chief Client Officer company leadership under our new strategy. See vision & offer, page 44 – New focus, led by the CEO, on the importance of a positive and inclusive culture across WPP CONTINUE TO SIMPLIFY OUR ORGANISATION See creativity, page 46 and culture, page 52 – Creation of VMLY&R, a new brand experience agency formed by the merger of VML and Y&R EVALUATE THE SHAPE OF THE PORTFOLIO TO – Integration of our healthcare agencies with MAXIMISE SHAREHOLDER VALUE AND Ogilvy, VMLY&R and Wunderman RELEASE CAPITAL – Began Wunderman and J. Walter Thompson – 30 disposals in 2018, raising £849 million to merger to create Wunderman Thompson, reduce our debt a new creative, data and technology agency – Initiated a strategic review of options in relation – VML, Y&R, Wunderman, J. Walter Thompson to Kantar to maximise shareholder value and WPP Health & Wellness collectively – The intention is to continue to develop Kantar accounted for 23% of WPP revenue while remaining a shareholder with strategic – Completion of Burson Cohn & Wolfe merger links to the business – Opened/announced further Campus co-locations See ?nancial review, from page 54 including New York, Prague and Toronto – Disposal of non-core minority holdings FULL STRATEGY REVIEW BY YEAR-END including AppNexus and Globant Announced 11 December 2018 See simpler structure, page 50 EMBED DATA AND TECHNOLOGY MUCH MORE DEEPLY INTO OUR OFFER – New data and technology team in place – First WPP Chief Technology Officer appointed – Technology made a key pillar of WPP’s new offer to clients See data & technology, page 48 WPP ANNUAL REPORT 2018 41

STRATEGIC REPORT OUR STRATEGY NEW Radical evolution: A strategy for growth We describe our new strategy as a radical We aim to deliver this strategy over the evolution. It’s radical because we are making next three years, incurring cash costs for tough decisions and taking decisive action restructuring of £300 million. The annual – having restructured a large proportion of savings are anticipated to be £275 million our revenue base in 2018 – but an evolution by the end of 2021, approximately half of because we are changing our business in a which will be reinvested in the business. way that respects the people and things that make WPP such a great organisation. Our new medium-term ?nancial targets, to be achieved by the end of 2021, are organic WPP has substantial assets, the most growth (de?ned as like-for-like revenue less important of which is our people. As a pass-through costs growth) in line with talent business we need to transform at the peers; headline operating pro?t margin right pace, and bring our people with us (excluding the impact of IFRS 16: Leases) of on the journey. at least 15%; and free cash ?ow conversion of 80-90%. Our strategy focuses on growth. The restructuring of our business and associated cost savings will enable increased investment in creativity, technology and talent, so that we are well positioned for top-line growth in the future. 42 WPP ANNUAL REPORT 2018

OUR NEW STRATEGY STRATEGIC REPORT VISION A new vision developed & OFFER with our people and Read more on page 44 clients and a refreshed, more contemporary offer to meet the needs of our clients in a rapidly changing market. CREATIVITY A renewed commitment Read more on page 46 to creativity, WPP’s most important competitive advantage. DATA & Harnessing the strength TECHNOLOGY of our marketing and Read more on page 48 advertising technology, and unique partnerships with technology ?rms, for the bene?t of clients. SIMPLER Reducing complexity STRUCTURE and making sure our Read more on page 50 clients can access the best resources from across the Company. CULTURE Investment in our people, Read more on page 52 our culture and a new set of values to ensure WPP is the natural home for the best and brightest talent. Our approach to sustainability aligns with our new strategy. See pages 60-77 WPP ANNUAL REPORT 2018 43

STRATEGIC REPORT OUR NEW STRATEGY VISION & OFFER Our ?rst step was to set out a new and inspiring vision for the future of WPP, and a modern new offer for our clients. “THE WAY WE PRESENT OURSELVES HAS TO REFLECT THE CREATIVITY OF THE PEOPLE INSIDE WPP.” Mark Read Chief Executive Of?cer VISION, PURPOSE AND IDENTITY Progress in 2018 WPP’s vision is to be a creative transformation – Launch of new positioning, visual company, bringing together creativity and identity and offer areas expertise in technology and data – with the – Merger of VML and Y&R, and purpose of building better futures for our Wunderman and J. Walter Thompson, to create integrated technology people, clients and communities. This and creative agency offerings competitive positioning was developed in – Strong start from first merger, consultation with our people and clients, VMLY&R, with $25 million in client and is supported by a refreshed brand wins in first 90 days identity created by WPP agencies Superunion and Landor. Focus for 2019 – Deployment of new offer in market SIMPLER, IMPROVED OFFER – Business development effort led by WPP’s offer covers four areas: communications, new team, including Chief Client Officer and Chief Marketing and experience, commerce and technology, as set Growth Officer out from page 7. Each of these areas is critical to success for modern clients. By bringing them together the Company will better serve clients’ needs as they react to the changing marketplace, and expand WPP’s own business in high-growth sectors. The areas of experience, commerce and technology See our film presenting WPP’s vision: already represent approximately one wpp.com/about/who-we-are quarter of WPP’s revenue. 44 WPP ANNUAL REPORT 2018 “CLIENTS COME TO WPP WHEN THEY WANT US TO UNLOCK GROWTH AND REINVENT FOR THE FUTURE.” Lindsay Pattison Chief Client Of?cer

OUR NEW STRATEGY STRATEGIC REPORT WPP ANNUAL REPORT 2018 45

STRATEGIC REPORT OUR NEW STRATEGY CREATIVITY We are putting our most important competitive advantage back at the heart of WPP where it belongs. A RENEWED COMMITMENT The creativity of our people – their wit and imagination, and the power of their ideas to deliver results for clients – is what makes WPP special and what differentiates us from other professional services ?rms. WPP has great creative strengths, having won the Holding Company of the Year award at the Cannes Lions International Festival of Creativity for seven consecutive years between 2011 and 2017 – but the business must invest more in this area. As part of our strategic review, we have made a renewed commitment to creativity, and will invest an incremental £15 million a year for the next three years in creative leadership, with a particular focus on the United States. LSO CLASSICS BMW 2018 AGENCY SUPERUNION CLIENT LONDON SYMPHONY ORCHESTRA 46 WPP ANNUAL REPORT 2018

OUR NEW STRATEGY STRATEGIC REPORT Progress in 2018 Focus for 2019 –£15 million annual incremental – Recruitment of leading creative commitment announced for talent, with a particular focus on investment in creative leadership the United States over the next three years – Continued focus on exceptional – New competitive positioning, work as evidenced by six spots brand identity and corporate at Super Bowl 2019 narrative placing creativity at the – Enhanced WPP presence at the heart of WPP Cannes Lions International Festival of Creativity “CREATIVITY IS THE CLOSEST WE COME TO MAGIC IN THIS LIFE.” John O’Keeffe Global Chief Creative Of?cer To learn more see wpp.com/featured WPP ANNUAL REPORT 2018 47

STRATEGIC REPORT OUR NEW STRATEGY DATA & TECHNOLOGY We will invest further in our technology and data capabilities and promote them as a clear source of competitive advantage to WPP. Technology powers WPP, both in terms Progress in 2018 of our internal operations and our service – Stephan Pretorius appointed as to clients: WPP’s first Chief Technology – Infrastructure: to help us connect, Officer in October 2018 collaborate, communicate, share – Announced additional investment in technology at investor day – Applications we use: to create, deploy and measure work for clients Focus for 2019 – Systems we build for clients: we consult – Build senior technology team at on, architect, build, integrate and run the centre of WPP platforms and applications for our clients – Creation of new WPP adtech and marketing cloud platform In 2018, we started the process to organise – Leverage relationships with WPP as a platform business, with a common technology firms through technology and data strategy that leverages new partnerships such as Google’s Waze the strengths of our unique technology partnerships and our existing capabilities in marketing and advertising technology. ORGANISING WPP AS A PLATFORM BUSINESS DATA AN OPEN DATA PLATFORM Within WPP, we already have enormously valuable data sets that we use to help our clients understand their customers and adapt accordingly. We are building a platform that curates this internal data alongside that of our clients, and other data that exists in the public domain. The platform will use cloud computing to connect and integrate this data. Through service interfaces our data and tools will be made available to our clients, partners and our own agencies – and always with the right access, privacy and commercial controls. All major data partnerships will be handled centrally at a WPP level, to allow us to leverage our scale commercially. 48 WPP ANNUAL REPORT 2018

OUR NEW STRATEGY STRATEGIC REPORT LUCK MACHINE AGENCY ISL CLIENT LYFT “TECHNOLOGY WILL DRIVE WPP’S TRANSFORMATION.” Stephan Pretorius Chief Technology Of?cer APPLICATIONS INVESTMENTS SKILLS PARTNERS INTELLIGENT, CONNECTED STRATEGIC INVESTMENT A SHARED TECHNICAL AN OPTIMISED APPLICATIONS FOCUS ON AI SERVICE CAPABILITY PARTNER PORTFOLIO We have a number of internal AI is rapidly changing our In the area of marketing Our ambition is not to be a applications that we use to do industry, driving improved technology and marketing primary software developer, work for our clients, but as with accuracy and speed and reduced systems integration we are but the primary partners to the data, we don’t have all of the cost in marketing, while opening already a strong player, competing leaders in the field – a position solutions internally. Our intention is new consumer engagement directly with companies such as we already occupy with the not to build applications ourselves, possibilities. AI also presents Exensio, Deloitte and Capgemini. world’s largest technology firms. but to partner with established signi?cant opportunity for We are the largest global providers where necessary, and operational ef?ciency and partners for Adobe, Salesforce, During 2019, our aim is to review focus our investment on automation, and harnessing Google, Marketo and Oracle our existing relationships, with a developing applications that this will make us more effective marketing clouds. view to ensuring that across WPP create true client value and for our clients. we only have one integrated differentiation (such as insights, Not only do we understand the relationship with each provider planning and analytics). Our strategy aims to achieve various platforms that our clients that operates under a single this through a combination of use, we also understand how the service agreement and is We will also simplify and external and internal investment tools need to be implemented as managed at the WPP level. consolidate our internal in AI, supported by an investment marketers. In 2019, we will bring This not only means better overlapping initiatives at an strategy team and product together our existing capability commercial terms and less agency level, which will allow stewardship board. that exists across a range of waste, but also better training, us to focus on executing the agencies into an integrated WPP and access to innovation which best innovations internally. technical services organisation, ultimately allows us to do better All applications will be covering the entire lifecycle for all work for our clients. available to all agencies. major adtech, martech and commerce platforms, from consulting and vendor selection to architecture, implementation and ongoing management. WPP ANNUAL REPORT 2018 49

STRATEGIC REPORT OUR NEW STRATEGY SIMPLER STRUCTURE Central to our new strategy is a simpler structure, built around the needs of clients, to allow easier access to WPP’s many resources. The structure is based on three principles: Clients, Companies and Countries. Over the years WPP has built many Progress in 2018 tremendous assets, but it has also become – Mergers to create VMLY&R and too unwieldy, with too much duplication. Wunderman Thompson As a result it has not always been as focused – Realignment of US healthcare or as ?eet of foot as it needs to be to satisfy agencies with major networks and elimination of WPP Health & the needs of all our clients around the globe. Wellness sub-holding company – 30 disposals of non-core That is changing as we streamline the investments and associates Company and concentrate 100% of our efforts on our core business of delivering Focus for 2019 outstanding work and the best outcomes – 100 planned mergers and 80 for clients. closures at local office level by end of 2019 In addition to agency mergers to create – Gross reduction in headcount of 3,500 by end of 2019 fewer, more integrated offerings, we have – Further non-core disposals simpli?ed our portfolio, making a number – Opening of new WPP Campuses of disposals of non-core investments. including Amsterdam, Madrid, And we will continue to develop Campus Milan and Mumbai co-locations to house our agencies in major cities, which deliver world-class working environments and increased ef?ciencies. “WE NEED TO HAVE FEWER, STRONGER COMPANIES THAT ARE BETTER POSITIONED TO GROW.” Andrew Scott Chief Operating Of?cer “CO LOCATING IN THE WPP SHANGHAI CAMPUS ENABLES US TO COLLABORATE, TO INTEGRATE OUR OFFER AND TO DELIVER MAXIMUM VALUE TO OUR CLIENTS.” Patrick Xu China Country Manager 50 WPP ANNUAL REPORT 2018

OUR NEW STRATEGY STRATEGIC REPORT SMART SPOKES AGENCY OGILVY CLIENT EYES JAPAN AND UBER EATS OUR THREE PRINCIPLES FOR A SIMPLER STRUCTURE CLIENTS COMPANIES COUNTRIES We will become a more We will have fewer, more We will integrate further client-centric organisation integrated companies at a country level to in order to deliver the equipped to adapt to a leverage our strengths best of WPP. changing market. in individual markets. 28% 23% 64,000 of our revenue is generated of our Company in revenue people in co-locations by our 30 largest clients terms was subject to merger by end of 2021 or realignment in 2018 WPP ANNUAL REPORT 2018 51

STRATEGIC REPORT OUR NEW STRATEGY CULTURE To attract the best and brightest our workplaces must be open, inclusive, respectful, collaborative and diverse in every sense. “MY JOB IS TO TAKE THE VALUES OF WPP AND EMBED THEM IN THE FABRIC OF THE ORGANISATION.” Judy Jackson Global Head of Culture ATTRACTING LEADING TALENT Progress in 2018 We believe that greater diversity, inclusion – Launch of our new values and gender balance leads to more rewarding – Established first WPP Executive and successful workplaces. In order to make Committee WPP the natural home for the best and Focus for 2019 brightest, and to attract the next generation – Implementation of new people of talent, we will champion a culture across strategy led by Global Chief WPP characterised by our new values: People Officer openness, optimism and a commitment – Programme to promote new to extraordinary work. values and culture led by Global Head of Culture STRENGTHENING OUR LEADERSHIP – Review of incentive arrangements To lead this element of the strategy we have to align with strategy appointed Jacqui Canney as our new Global Chief People Of?cer. Supporting Jacqui is another new appointment, Judy Jackson, in the role of Global Head of Culture. We have also established WPP’s first Executive Committee, drawn from both corporate and company leadership. To learn more see wpp.com/our-people 52 WPP ANNUAL REPORT 2018

OUR NEW STRATEGY STRATEGIC REPORT OUR VALUES OPEN We are inclusive and collaborative. We encourage the free exchange of ideas. We respect and celebrate diverse views. We are open-minded: to new ideas, new partnerships, new ways of working. OPTIMISTIC We believe in the power of creativity, technology and talent to create better futures for our people, clients and communities. We approach all that we do with con?dence: to try the new and to seek the unexpected. EXTRAORDINARY We are stronger together: through collaboration we achieve the amazing. We are creative leaders and pioneers of our industry. We deliver extraordinary every day. WPP ANNUAL REPORT 2018 53

STRATEGIC REPORT REVIEW FINANCIAL REVIEW OF RESULTS half of the year, with the Group earning On a like-for-like basis, the average number Reported billings were £55.798 billion, up approximately 40% of its pro?ts in the ?rst of people in the Group, excluding associates, 0.4%, up 3.3% in constant currency and up half and 60% in the second half. Headline in 2018 was 133,903 compared to 135,521 in 3.2% like-for-like. pro?t before interest and tax for 2018 was 2017, a decrease of 1.2%. On the same basis, down 9.7% to £2.047 billion, from £2.267 the total number of people, excluding Reported revenue was down 1.3% at £15.602 billion and down 7.4% in constant currencies. associates, at 31 December 2018 was 134,281 billion. Revenue on a constant currency basis compared to 135,187 at 31 December 2017, a was up 1.5% compared with last year, the Headline operating margin1 was down decrease of 906 or 0.7%. difference to the reportable number 1.1 margin points to 15.3%, and also down re?ecting the strength of the pound sterling 1.1 margin points in both constant currency EXCEPTIONAL GAINS AND against most currencies, particularly in the and like-for-like, at the upper end of the RESTRUCTURING AND ?rst half of the year. On a like-for-like basis, full-year revised operating margin target. TRANSFORMATION COSTS which excludes the impact of currency and Headline PBIT margin2 was down 1.2 margin As outlined in the investor day on acquisitions, revenue was up 0.8%. points to 16.0%, down 1.3 margin points in 11 December 2018, we have undertaken constant currency and down 1.2 margin a strategic review of our operations. As part Reported revenue less pass-through costs points like-for-like. The Group’s operating of that review, restructuring actions have was down 2.6%, up 0.2% in constant margin of 15.3% is after charging £37 million been taken to right-size underperforming currency and down 0.4% like-for-like. In the ($54 million) of severance costs, compared businesses, address high-cost severance fourth quarter, like-for-like revenue was down with £40 million ($52 million) in 2017 and £326 markets and simplify operational structures. 0.1%, a slight deterioration from the third million ($435 million) of incentive payments, This has included the merging or closure of quarter (0.2%), with all regions, except North which were 14.2% of operating pro?t before a number of WPP’s operating companies. America, showing an improvement. On the incentives, a similar level to the £324 million It also includes transformation costs same basis, revenue less pass-through costs ($421 million) or 13.1% in 2017. Achievement of with respect to strategic initiatives like in the fourth quarter was down 0.7%, an target, at an individual operating company co-locations in major cities, IT transformation improvement over the third quarter (1.5%), level, generally generates 15% of operating and shared services. with North America and the United Kingdom pro?t before bonus as an incentive pool and slightly weaker, more than offset by stronger 20% at maximum. £234 million of restructuring and growth in Western Continental Europe and transformation costs were recorded in the Asia Paci?c, Latin America, Africa & the On a reported basis, the Group’s operating fourth quarter in relation to this plan. This Middle East and Central & Eastern Europe. margin, before all incentives3 and income included £63 million of non-cash write-offs from associates, was 17.8%, down 1.0 margin and £171 million of actions that have a cash OPERATING PROFITABILITY point, compared with 18.8% last year. The impact in 2018 and beyond. In 2018 the cash Headline EBITDA was down 8.8% to £2.311 Group’s staff costs to revenue less pass- outflow was £50 million. The £171 million billion, from £2.534 billion the previous year through costs ratio, including severance and forms part of the anticipated £300 million and down 6.4% in constant currency. The incentives, increased by 0.5 margin points to total cash cost of the restructuring plan that Group’s revenue is more weighted to the 63.7% compared to 63.2% in 2017. In addition, we announced – with the balance to be second half of the year across all regions and there was an increase in the Group’s general incurred in 2019, 2020 and 2021. sectors, and, particularly, in the faster and administrative costs, principally in growing markets of Asia Paci?c and Latin relation to an increase in the provision for America. As a result, pro?tability and margin bad debts and higher IT costs. continue to be skewed to the second REVENUE LESS PASS-THROUGH COSTS GROWTH V 2017 This Strategic report should be read in conjunction with % pages 88-119 and pages 174-177. The Group’s key performance indicators are set out on page 59 and discussed in further detail in this report. Like-for-like -0.4 This Strategic report includes ?gures and ratios that are not readily available from the ?nancial statements. Management believes that these non-GAAP measures, including constant Acquisitions +0.6 currency and like-for-like growth, and headline pro?t measures, are both useful and necessary to better understand the Group’s -2.8 results. Where required, details of how these have been arrived FX at are shown in the notes of the ?nancial statements. 1 Headline operating pro?t (excluding income from associates) Reported -2.6 as a percentage of revenue less pass-through costs. 2 Headline PBIT as a percentage of revenue less pass-through costs. 3 Short and long-term incentives and the cost of share-based incentives. 54 WPP ANNUAL REPORT 2018

FINANCIAL REVIEW STRATEGIC REPORT The total of restructuring and transformation Reported pro?t before tax fell by 30.6% to REGIONAL REVIEW costs in 2018 was £302 million. The remaining £1.463 billion from £2.109 billion, the The pattern of revenue and revenue £68 million relates to severance restructuring difference between the headline and less pass-through costs growth differed costs recorded in the ?rst half, together with reported ?gures re?ecting principally the regionally. See the tables on page 56 costs in relation to the continuing global IT £302 million of restructuring and for details. transformation programme. transformation costs and £184 million of goodwill impairment charges. In constant North America constant currency revenue These exceptional costs of £302 million and currencies, reported pro?t before tax fell less pass-through costs was down 4.5% in £41 million of associate company exceptional by 28.1%. the ?nal quarter, the same as the third losses have been partly offset by exceptional quarter, and down 5.7% like-for-like, a slight gains of £235 million, primarily relating to the Reported pro?t after tax fell by 40.4% to deterioration on the third quarter (-5.3%). gain on the sale of the Group’s investment in £1.139 billion from £1.912 billion. In constant This re?ects continuing challenges in our Globant S.A. currencies, pro?ts after tax fell 38.5%. advertising businesses, with data investment management and healthcare also slower, This gives a net exceptional loss of £108 Pro?ts attributable to shareholders fell 41.5% partly offset by a signi?cant improvement million and compares with a net exceptional to £1.063 billion from £1.817 billion, again in public relations and public affairs. On a loss in 2017 of £24 million. reflecting principally the £302 million of full-year basis, constant currency revenue restructuring and transformation costs and less pass-through costs was down 3.5%, INTEREST AND TAXES £184 million of goodwill impairment. In with like-for-like down 4.2%. Addressing our Net ?nance costs (excluding the revaluation constant currencies, pro?ts attributable to underperforming operations in the US is a of financial instruments) were £184.5 million, shareholders fell by 39.6%. key element of WPP’s new strategy. compared with £174.6 million in 2017, an increase of £9.9 million. This is due to higher Headline diluted earnings per share fell by United Kingdom constant currency dollar interest rates. 10.3% to 108.0p from 120.4p. In constant revenue less pass-through costs was currencies, earnings per share on the same down 2.4% in the ?nal quarter and down The headline tax rate was 22.5% (2017: basis fell by 8.1%. Reported diluted earnings 2.7% like-for-like, slightly weaker than the 22.0%) and on reported pro?t before tax per share fell by 40.8% to 84.3p from 142.4p -2.0% shown in quarter three. Media was 22.1% (2017: 9.3%). The difference in the and decreased 38.9% in constant currencies. investment management and the rates in 2017 was principally due to an specialist communications businesses exceptional tax credit, primarily relating As outlined in our investor day presentation, were particularly strong with data to the re-measurement of deferred tax despite the reduction in diluted earnings per investment management improving. Our liabilities. Given the Group’s geographic mix share, your Board proposes to maintain the public relations and public affairs and direct, of pro?ts and the changing international tax ?nal dividend of 37.3p per share, which, interactive and ecommerce businesses environment, the tax rate is expected to together with the interim dividend of 22.7p were slower. On a full-year basis, constant increase slightly over the next few years. per share, makes a total of 60.0p per share currency revenue less pass-through costs for 2018, the same as the prior year. This was up 0.2%, with like-for-like down 0.5%. EARNINGS AND DIVIDEND represents a dividend pay-out ratio of 56%, Headline pro?t before tax was down 11.0% to compared with 50% last year. The record Western Continental Europe constant £1.863 billion from £2.093 billion, and down date for the ?nal dividend is 14 June 2019, currency revenue less pass-through costs 8.5% in constant currencies. payable on 8 July 2019. was up 4.1% in the ?nal quarter, a signi?cant improvement on the growth in quarter three DIVIDEND PER SHARE Pence (p) 60.00 60.00 56.60 44.69 38.20 2014 2015 2016 2017 2018 WPP ANNUAL REPORT 2018 55

STRATEGIC REPORT FINANCIAL REVIEW of 1.3%. On a like-for-like basis revenue less pass-through costs was also up 4.1%, the strongest quarter of the year, and compared to -0.4% in quarter three. Twelve of the Group’s top 14 markets showed significant growth in quarter four, particularly Austria, Belgium, Denmark, Finland, Germany, Italy, the Netherlands, Portugal, Sweden and Turkey. For the year, Western Continental Europe constant currency revenue less pass-through costs grew 4.1% with like-for-like up 2.0%, the second strongest-performing region. In Asia Paci?c, Latin America, Africa & the Middle East and Central & Eastern Europe, on a constant currency basis, revenue less pass-through costs was up 0.4% in the fourth quarter and up 2.6% like-for-like, slightly above the third quarter growth of 2.4%. In the fourth quarter, Latin America grew over 7%, stronger than the third quarter, with Central & Eastern Europe showing double-digit growth in the fourth quarter compared with almost 5% in quarter three. Asia Paci?c and Africa & the Middle East were slightly weaker. On a full-year basis, constant currency revenue less pass-through costs growth in the region was 2.0% with like-for-like growth 2.5%, the strongest- performing region. REVENUE ANALYSIS £ million 2018 ? reported ? constant1 ? LFL2 % group 20173 % group N. America 5,371 -5.1% -1.9% -3.0% 34.4% 5,659 35.8% United Kingdom 2,189 2.6% 2.6% 1.5% 14.0% 2,133 13.5% W Cont. Europe 3,335 3.2% 3.5% 1.7% 21.4% 3,231 20.4% AP, LA, AME, CEE4 4,707 -1.6% 3.8% 4.4% 30.2% 4,781 30.3% Total Group 15,602 -1.3% 1.5% 0.8% 100.0% 15,804 100.0% REVENUE LESS PASS-THROUGH COSTS ANALYSIS £ million 2018 ? reported ? constant ? LFL % group 2017 % group N. America 4,474 -6.7% -3.5% -4.2% 34.9% 4,794 36.4% United Kingdom 1,691 0.2% 0.2% -0.5% 13.2% 1,688 12.8% W Cont. Europe 2,736 4.0% 4.1% 2.0% 21.3% 2,631 20.0% AP, LA, AME, CEE 3,926 -3.2% 2.0% 2.5% 30.6% 4,057 30.8% Total Group 12,827 -2.6% 0.2% -0.4% 100.0% 13,170 100.0% OPERATING PROFIT ANALYSIS (HEADLINE PBIT) £ million 2018 % margin* 2017 % margin* N. America 804 18.0% 937 19.6% United Kingdom 245 14.5% 280 16.6% W Cont. Europe 372 13.6% 376 14.3% AP, LA, AME, CEE 626 15.9% 674 16.6% Total Group 2,047 16.0% 2,267 17.2% * Headline PBIT as a percentage of revenue less pass-through costs. Notes 1 Percentage change at constant currency exchange rates. 2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals. 3 Prior year ?gures have been restated for the impact of the adoption of IFRS 15: Revenue from Contracts with Customers, as described in the accounting policies. 4 Asia Paci?c, Latin America, Africa & Middle East and Central & Eastern Europe. REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION V 2017 % North America -6.7 United Kingdom +0.2 Western Continental Europe +4.0 Asia Pacific, Latin America, Africa & the -3.2 Middle East and Central & Eastern Europe Total -2.6 56 WPP ANNUAL REPORT 2018

FINANCIAL REVIEW STRATEGIC REPORT BUSINESS SECTOR REVIEW The pattern of revenue and revenue less pass-through costs growth also varied by sector and operating brand. The tables opposite give further details. Advertising and Media Investment Management In constant currencies, advertising and media investment management revenue less pass-through costs was down 1.6% in the fourth quarter, a signi?cant improvement on the -6.5% in the third quarter and the strongest quarter of the year. On a like-for-like basis revenue less pass-through costs was up 0.4% in the fourth quarter, the ?rst quarter of positive growth, with both our advertising and media investment businesses showing considerable improvement over the third quarter. However, despite this improvement, our advertising businesses remain under pressure. The strong revenue less pass-through costs growth across most of the Group’s media investment management businesses, offset by slower growth in our advertising businesses in most regions, resulted in the combined reported operating margin of this sector being down 1.2 margin points at 17.6% and down 1.4 margin points in constant currency. REVENUE ANALYSIS £ million 2018 ? reported ? constant1 ? LFL2 % group 20173 % group AMIM4 7,132 -3.2% -0.4% 1.0% 45.6% 7,369 46.6% Data Inv. Mgt. 2,582 -4.5% -1.8% -2.0% 16.6% 2,703 17.1% PR & PA5 1,211 0.6% 3.4% 3.1% 7.8% 1,204 7.6% BC, HW & SC6 4,677 3.3% 6.3% 1.5% 30.0% 4,528 28.7% Total Group 15,602 -1.3% 1.5% 0.8% 100.0% 15,804 100.0% REVENUE LESS PASS-THROUGH COSTS ANALYSIS £ million 2018 ? reported ? constant ? LFL % group 2017 % group AMIM 5,530 -6.1% -3.3% -1.2% 43.1% 5,889 44.7% Data Inv. Mgt. 1,966 -4.2% -1.3% -1.8% 15.3% 2,052 15.6% PR & PA 1,136 -0.4% 2.5% 2.6% 8.9% 1,141 8.7% BC, HW & SC 4,195 2.6% 5.6% 0.6% 32.7% 4,088 31.0% Total Group 12,827 -2.6% 0.2% -0.4% 100.0% 13,170 100.0% OPERATING PROFIT ANALYSIS (HEADLINE PBIT) £ million 2018 % margin* 2017 % margin* AMIM 972 17.6% 1,109 18.8% Data Inv. Mgt. 301 15.3% 350 17.1% PR & PA 184 16.2% 183 16.1% BC, HW & SC 590 14.1% 625 15.3% Total Group 2,047 16.0% 2,267 17.2% * Headline PBIT as a percentage of revenue less pass-through costs. Notes 1 Percentage change at constant currency exchange rates. 2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals. 3 Prior year ?gures have been restated for the impact of the adoption of IFRS 15: Revenue from Contracts with Customers, as described in the accounting policies. 4 Advertising and Media Investment Management. 5 Public Relations & Public Affairs. 6 Brand Consulting, Health & Wellness and Specialist Communications (including direct, interactive and ecommerce). REVENUE LESS PASS-THROUGH COSTS BY BUSINESS V 2017 % Advertising and Media Investment Management -6.1 Data Investment Management -4.2 Public Relations and Public Affairs -0.4 Brand Consulting, Health & Wellness and Specialist Communications +2.6 Total -2.6 WPP ANNUAL REPORT 2018 57

STRATEGIC REPORT FINANCIAL REVIEW Data Investment Management Brand Consulting, Health & Wellness This free cash flow was enhanced by £849 In constant currencies, data investment and Specialist Communications million of proceeds from the disposal of management revenue less pass-through costs Our brand consulting, health & wellness associates and investments, offset by £289 was down 2.8% in the fourth quarter, and and specialist communications businesses million in cash acquisition costs (investments down 2.8% like-for-like. On a full-year basis, (including direct, interactive and ecommerce), and new acquisition payments), £207 million constant currency revenue less pass-through performed less well in the fourth quarter with in share buy-backs and £747 million in costs was down 1.3%, down 1.8% like-for-like. constant currency revenue less pass-through dividends, a net outflow of £394 million. This Geographically, revenue less pass-through costs up 0.2%, compared with 6.5% in the resulted in a net cash inflow of £709 million. costs was up strongly in Asia Paci?c and third quarter, with like-for-like down 1.6%, as Latin America, but North America was our healthcare businesses in North America Free cash ?ow conversion1 in 2018 was 81%. weaker. Kantar Worldpanel and Kantar Media and some direct, interactive and ecommerce showed strong like-for-like revenue less businesses came under pressure. On a BALANCE SHEET HIGHLIGHTS pass-through costs growth, with Kantar full-year basis, revenue less pass-through Average net debt in 2018 was £4.966 billion, Insights, Kantar Health, Kantar Public and costs was up 5.6% in constant currency and compared to £5.125 billion in 2017, at 2018 Lightspeed less robust. Reported operating up 0.6% like-for-like. In brand consulting, exchange rates. On 31 December 2018 net margins were down 1.8 margin points to Landor and FITCH performed strongly, and debt was £4.017 billion, against £4.483 billion 15.3% and down 1.8 margin points in in the direct, interactive and ecommerce on 31 December 2017, a decrease of £466 constant currency. businesses, Wunderman, Hogarth, AKQA, million (a decrease of £605 million at 2018 Blue State Digital, F.biz and Deeplocal exchange rates). The reduced period end Public Relations and Public Affairs performed well. Operating margins, for the debt figure reflects the benefit of £849 In the fourth quarter, in constant currencies sector as a whole, were down by 1.2 margin million proceeds in relation to disposal and like-for-like, our public relations and points to 14.1% and down 1.3 margin points of our interests in certain associates and public affairs businesses were the strongest- in constant currency, with operating investments, the principal of which were performing sector, as they were in the ?rst margins negatively affected as parts of our Globant S.A., Imagina, AppNexus and Bruin. half and third quarter, with growth of 3.3% direct, interactive and ecommerce, brand This trend has continued in the ?rst two and 1.2% respectively. On a full-year basis, consulting and healthcare businesses in months of 2019, with average net debt of constant currency revenue less pass-through North America slowed. £4.015 billion, compared with £4.569 billion costs grew 2.5% with like-for-like growth in the same period in 2018, a decrease of 2.6%. Geographically, all regions showed CASH FLOW HIGHLIGHTS £554 million (a decrease of £671 million at strong growth, with the United Kingdom and In 2018, operating profit was £1.431 billion, 2019 exchange rates). Africa & the Middle East particularly strong. depreciation, amortisation and goodwill Burson Cohn & Wolfe, Hill+Knowlton impairment £728 million, non-cash share- The net debt figure of £4.017 billion at Strategies and the specialist public relations based incentive charges £85 million, working 31 December compares with a current and public affairs businesses Finsbury, Hering capital and provisions inflow £166 million, net market capitalisation of approximately Schuppener and Buchanan, performed interest paid £162 million, tax paid £384 £10.966 billion ($14.345 billion), giving particularly well. Overall operating margins million, capital expenditure £375 million, an enterprise value of £14.983 billion improved 0.1 margin points to 16.2% and by earnout payments £120 million and other net ($19.600 billion). The average net debt to 0.1 margin points in constant currency. cash outflows £266 million, principally £235 EBITDA ratio, at 2.1x, is above the revised million gains on disposal of investments and target range of 1.5-1.75x to be achieved by subsidiaries. Free cash ?ow available for debt the end of 2021. repayment, acquisitions (excluding earnouts), share buy-backs and dividends was, therefore, £1.103 billion. NET DEBT £ million 4,483 4,131 4,017 3,211 2,275 1 Free cash ?ow conversion is the ratio of free cash ?ow to headline earnings. Free cash ?ow is after earnouts and changes in working capital and before new acquisition 2014 2015 2016 2017 2018 spend, disposals and shareholder distributions as set out in note 29 of the ?nancial statements. 58 WPP ANNUAL REPORT 2018

FINANCIAL REVIEW STRATEGIC REPORT RETURN OF FUNDS TO SHAREHOLDERS In addition, 30 disposals were completed Medium-term ?nancial targets Dividends paid in respect of 2018 will total in 2018 realising proceeds of £849 million, At our investor day in December, we set approximately £753 million for the year. Funds helping to strengthen the Group’s balance out our new medium-term ?nancial targets returned to shareholders in 2018 totalled sheet and improve leverage. The disposal that will allow us to invest in talent and £955 million, including share buy-backs. programme will continue in 2019 and a technology, improve our competitive further six disposals have been completed position and deliver sustainable long-term In 2018, 16.6 million shares, or 1.3% of the year-to-date. growth rates. Our targets, to be achieved issued share capital, were purchased at a by the end of 2021, are: cost of £207 million. OUTLOOK – Organic growth (defined as like-for-like Financial guidance revenue less pass-through costs growth) PROGRESS ON GROWTH STRATEGY Our 2019 targets are: in line with peers; In the last seven months, we have made – Like-for-like revenue less pass-through – Headline operating margin (excluding signi?cant progress in simplifying our costs down 1.5% to 2.0%, with stronger the impact of IFRS 16: Leases) of at least operations to make them more client-centric headwinds in the first half, due to client 15%; and and improving WPP’s financial position. losses in 2018; and – Free cash flow conversion of 80%-90%. Milestones include the launch of a new – Headline operating margin to revenue vision, offer and brand identity for WPP, the less pass-through costs down around 1.0 USES OF FUNDS creation of two new integrated networks margin point on a constant currency basis As per the investor day in December, over (VMLY&R and Wunderman Thompson), the (excluding the impact of IFRS 16: Leases). the next three years we will prioritise the realignment of the US healthcare agencies dividend over share buy-backs and will with major networks, the formation of WPP’s In 2019, our primary focus will remain on balance targeted M&A with divestments. ?rst Executive Committee and the initiation addressing our issues in North America. of the process to ?nd a ?nancial and We will achieve this through investment in strategic partner for Kantar. leadership, creative talent and technology and delivering on the potential of the As part of the restructuring plan we outlined newly merged businesses of VMLY&R and in the investor day presentation, 70 of the Wunderman Thompson. In addition, we 100 planned of?ce mergers have been will ensure the gross bene?ts from the completed, 57 of the 80 of?ces have been restructuring actions taken in 2018 and closed and approximately 2,650 of the 3,500 continuing to be taken in 2019 are realised. planned redundancies have been actioned. To help drive top-line growth, the incentive The anticipated gross savings remain in line plans for 2019 will include up to half of the with the £160 million estimate in December. incentive pools being funded based on As we outlined in the investor day a improving growth in revenue less pass-proportion of these gross savings will be through costs, with the remaining reinvested in talent and technology proportion based on growth in operating development. pro?t and margin. For more information on our strategy see pages 42-53 WPP ANNUAL REPORT 2018 59

STRATEGIC REPORT SUSTAINABILITY At WPP we build better futures for our people, our clients – and our wider communities. WHY SUSTAINABILITY MATTERS 2018 has seen record heatwaves on four continents, and perilous water shortages in South Africa, Australia and India. It has seen women the world over say #MeToo, and consumers take a stand on plastic packaging at supermarket checkouts. From technological disruption, climate change and resource scarcity to skills shortages, demographic shifts and political uncertainty, our clients, across every sector, face a complex set of interconnected social, “WE HAVE A STRONG economic and environmental pressures. TRACK RECORD OF BUILDING BRANDS The potential upside to tackling sustainability WITH PURPOSE THAT challenges is significant – it is estimated that sustainable business model innovation HELP OUR CLIENTS could open economic opportunities worth ACHIEVE THEIR $12 trillion and create 380 million jobs1. SUSTAINABILITY Consumer expectations are changing. GOALS. BUT WE CAN Today’s consumers want more from their AND MUST DO MORE.” favourite brands than just a great product – they expect transparency across the supply Andrea Harris chain and want brands to have a point of Group Chief Counsel view and to play an active role in society. and Head of Sustainability Yet there is often cynicism and a lack of trust about corporate motivations and actions. 1 Better Business, Better World, Business & Sustainable Development Commission, January 2017. 60 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT FRIENDLY ARMS AGENCY AKQA SÃO PAULO CLIENT AACD, ORTHOPAEDIC HOSPITAL To learn more see wpp.com/friendlyarms WPP ANNUAL REPORT 2018 61

STRATEGIC REPORT SUSTAINABILITY As the importance of sustainability grows for our clients, so does its impact on WPP. OUR RESPONSE UNITED NATIONS SUSTAINABLE Our clients look to us to provide the insight, DEVELOPMENT GOALS (SDGs) expertise and creative solutions they need We support the UN SDGs which provide a to navigate this changing landscape and framework for government agencies, civil communicate their purpose effectively and society, the private sector and citizens to authentically. Our own sustainability strategy work together to create a more sustainable helps us to do this with credibility, meeting future. Good communications are essential changing client expectations while reducing to bring about the shift in attitudes and risks and creating a more resilient business behaviour needed to tackle extreme for the long term. poverty, inequality and climate change by 2030. We aim to play our part through the SUSTAINABILITY AND OUR STRATEGY improvements we are making in our business, Our sustainability strategy aligns with all ?ve our pro bono work and our work for clients elements of our new corporate strategy, on social and environmental themes. which we introduced in late 2018. The table opposite sets out the most material ways in We have analysed the 17 Global Goals and which sustainability supports our strategy. the 169 targets which sit behind them to identify those which are most relevant for our business. To learn more about the Goals we believe we can make the most signi?cant contribution towards, see page 8 of our full Sustainability Report 2018, available as a PDF download. For our full review of our sustainability activities and outcomes, download our Sustainability Report 2018. wpp.com/sustainability 62 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT STRATEGIC ELEMENT SUSTAINABILITY STRATEGY VISION A STRONGER OFFER FOR OUR CLIENTS A stronger offer for & OFFER A growing number of clients are grappling with sustainable business practices helps us to our clients, see sustainability challenges and looking to articulate broaden and deepen these partnerships, pages 66 and 67 the purpose of their brands. They look for partners and to meet the growing expectations who share their sustainability values and and sustainability requirements in client Transparency and aspirations. Our commitment to responsible and procurement processes. trust, see pages 74 and 75 CREATIVITY SOCIAL INVESTMENT Social investment, Our pro bono work can make a signi?cant Pro bono work bene?ts our business too, see pages 68 and 69 difference to charities and NGOs, enabling our providing rewarding creative opportunities for partners to raise awareness and funds, recruit our people that often result in award-winning members, and achieve campaign objectives. campaigns that raise the pro?le of our companies. DIVERSE AND INCLUSIVE TEAMS Attracting and Creativity thrives on diversity of background and success. We want all of our people to feel retaining talent, thought. This makes having a diverse and inclusive valued and able to ful?l their potential, see pages 70 and 71 workplace essential to our long-term business regardless of gender, ethnicity, age or disability. DATA & PRIVACY AND DATA ETHICS Privacy and data TECHNOLOGY Data – including consumer data – can play an responsibility to look after this data carefully, ethics, see page 76 essential role in our work for clients. Data security to collect data only when needed and with and privacy are increasingly high-pro?le topics for consent where required, and to store and regulators, consumers and our clients. We have a transfer data securely. SIMPLER GREENER OFFICE SPACE Environment, STRUCTURE Our work to simplify our structure and consolidate locations that use green building standards see page 72 our of?ce space is driving a positive impact on our and reduce our impact, help us to use energy use and carbon footprint. We are reducing space more ef?ciently and encourage the overall number of of?ces we occupy, moving to collaboration between our companies. CULTURE SHARED VALUES ACROSS OUR BUSINESS Attracting and AND SUPPLY CHAIN retaining talent, Strong employment policies, investment in skills Selecting suppliers and partners who see pages 70 and 71 and inclusive working practices help us recruit, adopt standards consistent with our own motivate and develop the talented people we can reduce costs, improve ef?ciency and Supply chain, need to serve our clients in all disciplines across protect our reputation. see page 73 our locations. WPP ANNUAL REPORT 2018 63

STRATEGIC REPORT SUSTAINABILITY “A NEW KIND OF ACTIVISM SHAPED BY PEOPLE FROM AROUND THE WORLD THROUGH SOCIAL MEDIA.” Sir David Attenborough 64 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT HOW GOOD MARKETING MAKES FOR BETTER DEMOCRACY MULTI-AGENCY AGENCY TEAM LED BY GREY LONDON UNITED CLIENT NATIONS DPI AND UNFCCC In an age of growing grassroots activism, many people feel that action happens on the street, not behind the closed doors of the United Nations. We brought together a multi-agency team, led by Grey London, to help the UN reconnect with the world’s people and put them back at the centre of their work. The team put a new People’s Seat in the UN plenary, right among world leaders. It was the ?rst seat in UN history not representing a nation or speci?c interest. Instead it was there to give the world a voice on climate change. The campaign asked people around the world to express their thoughts, fears and experiences of climate change. These testimonials were crafted into a UN address delivered by Sir David Attenborough to key leaders poised to negotiate one of the most important decisions in the history of our planet. The speech dominated the global news agenda, reaching some 1.3 billion people and ensuring the climate talks made headlines in countries including the UK, US and China. RESULT 1.3bn+ people reached within the ?rst month of The People’s Seat launch December 2018 To learn more see wpp.com/peopleseat WPP ANNUAL REPORT 2018 65

STRATEGIC REPORT SUSTAINABILITY A FOR STRONGER OUR CLIENTS OFFER Our biggest sustainability impact is through the work we do for clients, which reaches billions of people each year. We partner with a growing number of Given our clients’ growing focus on clients on sustainability-related briefs. sustainability, during 2019 we will explore Our blend of expertise means we can how we can further build our sustainability offer clients cutting-edge technology capabilities and facilitate collaboration alongside the creativity needed to inspire between WPP agencies on sustainability-consumers and help to make behavioural related briefs. shifts more desirable. COMPLIANCE WITH Marketing is a powerful tool with the potential MARKETING STANDARDS to change people’s attitudes and behaviour. We expect our companies to comply with So it is important that we apply high ethical all relevant legal requirements and codes standards to our work. We continue to of practice for marketing standards in the maintain high standards and compliance work they produce for clients. A small procedures in areas such as business ethics, number of the campaigns we produce human rights and data security and privacy. give rise to complaints, some of which are upheld by marketing standards authorities. WORK WITH PURPOSE Our companies take action where needed Increasingly, our clients aspire to create to prevent a recurrence. brands with purpose and look to us to help them to integrate sustainability into brand ETHICAL DECISIONS IN OUR WORK strategy, communications and marketing. Our work for clients can sometimes raise This work is of growing importance to WPP. ethical issues, for example work for A survey of our top client team leaders in government clients, work relating to 2018 found that over 80% had recently sensitive products or marketing to children. discussed sustainability with their clients, We have a review and referral process for with almost half of these discussions relating work that may present an ethical risk. to the development of a brand campaign. Before accepting potentially sensitive Our work in this area can include: work, our people are required to elevate – Brand and strategy consulting: the decision to the most senior person in integrating social and environmental the relevant of?ce and then to the most values into brand and business strategy. senior WPP executive in the country – Technology and research: using concerned, who will decide if further technology and data to understand referral to a global WPP executive is consumer attitudes and behaviour in required. This referral process is covered relation to sustainability. in our How We Behave online training. – Communications: helping clients communicate credibly on social and Companies also have copy-checking environmental issues with all audiences and clearance processes through which from consumers, employees and citizens campaigns are reviewed by the legal to investors, regulators, the media and team before publication. Requirements NGOs. This can include social marketing are particularly comprehensive in campaigns that raise awareness or drive sectors such as pharmaceutical behaviour change on issues of public marketing which are highly regulated. interest, often for government and NGOs as well as corporate clients. £2.07bn revenues generated through clients who engaged with us on sustainability 13% equivalent to approximately 13% of our total revenue To ?nd more examples of our client and pro bono work to address social and environmental issues download our Sustainability Report 2018. wpp.com/sustainability 66 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT I’M FINE AGENCIES OGILVY & MINDSHARE CLIENT DOVE (UNILEVER) This campaign by Ogilvy for Dove, with Mindshare handling media, saw the creation of four animations, each telling the real story of a girl’s struggles with self-esteem. The ?lms were launched in social, digital and cinema in markets across the world, giving parents the tools to help their kids build body-con?dence. To learn more see wpp.com/im?ne WPP ANNUAL REPORT 2018 67

STRATEGIC REPORT SUSTAINABILITY SOCIAL INVESTMENT Charities and NGOs have a vital role to play SOCIAL IMPACT in tackling issues such as health, education, Our support helps NGOs and charities to human rights and the environment, often carry out important work in areas such with very limited resources. We can help as improving health and education, and them increase their impact by providing protecting human rights. With pro bono communications and creative services on a work this can often be worth more than pro bono basis (for little or no fee). an equivalent cash donation because it enables charities to raise awareness, This can have a signi?cant positive impact on increase donations, recruit members, the organisations we support, enabling them impact behaviour and achieve campaign to raise awareness and funds, recruit goals. We have conducted research to members, and achieve campaign objectives. quantify this wider impact. It bene?ts our business too, providing rewarding creative opportunities for our Our most recent analysis shows that our people that often result in award-winning pro bono work in 2018 created wider campaigns and raise the creative pro?le of social benefits worth £91 million to our companies. Our agencies also negotiate society (2017: £103 million). This includes, free media space for charity campaigns, for example, the impact of charities being enabling them to reach a wide audience. able to improve health and wellbeing in communities. The wider social bene?ts Alongside our pro bono work, our social created by our pro bono work, charitable investment is one of the main ways we can donations and free media space is worth an contribute to progress on the UN Sustainable estimated £331 million (2017: £397 million). Development Goals. We established our Charity Committee of senior executives in COMMON GROUND 2018 to oversee our approach and help us to We launched Common Ground in 2016 as target our support effectively. a collaboration between the world’s six biggest advertising and marketing We encourage our people to get involved services groups and the United Nations as volunteers. 41% of our companies have a to use the power of communication to formal volunteering policy and 56% accelerate progress towards achieving the organised volunteering activities for their 17 Sustainable Development Goals by 2030. people during 2018. At WPP our focus is gender equality (Goal 5), WHAT WE GAVE IN 2018 with an emphasis on tackling gender-biased Our pro bono work was worth £11.3 million in stereotypes in the media and on promoting 2018 (2017: £12.7 million). We also made cash equal opportunities for women and girls. donations to charities of £6.2 million (2017: £7.7 million), resulting in a social investment During 2018, GroupM and other WPP worth £17.5 million (2017: £20.4 million). This agencies launched Creativity for Equality, is equivalent to 1.20% of reported pro?t a strategic partnership with UN Women before tax (2017: 0.97%). to help positively impact the lives of girls and women. The partnership began with WPP media agencies negotiated free a 16-day campaign against gender-based media space worth £23.8 million on behalf violence across six countries. of pro bono clients (2017: £29 million), making a total social contribution of £41.3 million (2017: £49.4 million). TOTAL SOCIAL CONTRIBUTION £m Charitable donations Pro bono work Free media space 46.9 49.4 40.2 42.3 41.3 2014 2015 2016 2017 2018 PRO BONO WORK BY SECTOR % Arts 4% Education 30% Environment 5% Health 15% Human Rights 7% Local Community 39% £11.3m £23.8m in pro bono work free media space negotiated by WPP companies 1.20% £331m social investment wider social as a percentage bene?ts of pro bono of reported work, charitable pro?t before tax donations and free media space For more examples of our pro bono work download our Sustainability Report 2018. wpp.com/sustainability 68 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT OCEAN THE FUTURE OF AGENCY OGILVY UK CLIENT GREENPEACE This ?lm follows children visiting an aquarium, where they see some of the 800,000 tonnes of plastic packaging generated by UK supermarkets every year, and encourages people to sign a petition calling on retailers to reduce plastic waste. >970,000 RESULT people signed the petition since April 2018 Watch the video: wpp.com/oceanofthefuture BLINK THEY ARE AND GONE AGENCY WUNDERMAN THOMPSON MUMBAI AND AMSTERDAM CLIENT JIMMY NELSON This ?lm uses over 1,500 images to document the lives of the world’s last remaining indigenous communities, warning us that we are losing our global cultural heritage. $ RESULT 1m in free media December 2018-February 2019 Watch the video: wpp.com/blink WPP ANNUAL REPORT 2018 69

STRATEGIC REPORT SUSTAINABILITY ATTRACTING RETAINING TALENT AND Our clients choose WPP on the strength of our people’s insights, creativity and original ideas. To attract and retain the best, most forward- views on sustainability-related topics thinking talent, we are focusing on: was used in surveys covering 75% of our – Embedding a culture based on our new employees. During 2019, we plan to launch values of being open, optimistic and doing a Company-wide employee survey. extraordinary work; – Improving diversity and inclusion; LABOUR RELATIONS – Investing in skills and creativity; and We support the right of our people to join – Offering attractive compensation, flexible trade unions and to bargain collectively, working practices and opportunities for although trade union membership is relatively collaboration and growth. low in our industry. In 2018, around 7% of our employees were either members of a trade SKILLS, TRAINING AND DEVELOPMENT union or covered by a collective bargaining We invest in training and development to agreement (2017: 8%). There were 1,267 build the creative, technical and leadership consultations with works councils, of which skills our business needs. Training and the majority were in Europe (2017: 4,116). opportunities for professional and personal development contribute to employee As part of our transformation programme we engagement and retention. announced we will be making around 3,500 redundancies in our business, as we merge Overall, we spent £45.5 million on training in and restructure some of our agencies and 2018 (2017: £44.9 million) with 65% of our as a result of changes in our client base. people taking part in formal training We aim to support employees affected by programmes, averaging 5.7 hours per person. redundancy including through our employee assistance programmes. We follow up with training participants to understand the impact of our courses and DIVERSITY AND INCLUSION identify opportunities for improvement. Creativity thrives on diversity of background and thought. This makes having a diverse During 2018, 76% (2017: 80%) of our people and inclusive workplace essential to our participated in a formal appraisal process, long-term business success. We want all of and 69% (2017: 70%) of executive leaders and our people to feel valued and able to ful?l 66% (2017: 68%) of senior managers had a their potential, regardless of gender, 360-degree appraisal. ethnicity, age or disability. ENGAGEMENT AND FEEDBACK WPP does not tolerate harassment, sexual In 2018, we began the process to set up our harassment, discrimination or offensive ?rst employee forum in the UK. We will roll behaviour of any kind. We select and promote this out to more markets starting with India, our people on the basis of their quali?cations China and Turkey. The views and ideas raised and merit, without discrimination or concern through these forums will be shared with for factors such as race, religion, national the two Non-Executive Board Directors origin, colour, sex, sexual orientation, gender responsible for workforce engagement. identity or expression, age or disability. These commitments are set out in our Code of We use employee surveys to assess employee Business Conduct, which applies to all our engagement and satisfaction. In 2018, a set of people and is available on the WPP website, consistent questions to assess employee in our Policy Book and on our intranet. GENDER DIVERSITY Board and Executive 36% (1,796) 64% (3,189) 2018 35% (1,820) 65% (3,436) 2017 Senior Managers 49% (9,949) 51% (10,407) 2018 49% (9,754) 51% (10,017) 2017 All other employees 56% (60,601) 44% (47,216) 2018 56% (60,456) 44% (47,555) 2017 Total employees 54% (72,346) 46% (60,812) 2018 54% (72,030) 46% (61,008) 2017 • Female • Male AGE DIVERSITY 19 or under <1% 20–29 35% 30–39 37% 40–49 18% 50–59 8% 60 and over 2% DAYS LOST DUE TO SICKNESS Days lost due to sickness Days lost per person 3.2 3.2 3.4 3.2 3.0 455,680 423,428 395,234 416,638 365,586 2014 2015 2016 2017 2018 70 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT Employees are trained on our commitments HEALTH, SAFETY AND WELLBEING through our online ethics training, How We We aim to support our people to look Behave, which includes training on diversity after their physical and mental health and and unconscious bias. wellbeing. The main health and safety risks in our business are work-related stress and GENDER BALANCE ergonomic injuries. 76% of our companies Our workforce is gender-balanced overall have appointed someone with speci?c and the proportion of women in executive responsibility for health and safety leadership roles increased this year. At the management. There were no work-related Board level the appointment of Cindy Rose deaths in 2018. raises the proportion of women on the Board to 33%. Achieving gender balance at We offer a range of programmes to address leadership levels remains a priority. health and safety risks which can include: ?tness facilities or subsidised gym In 2018, we signed up to the Women’s memberships; health and nutrition services; Empowerment Principles, established by UN health insurance and medical assessments; Women and UN Global Compact as a guide counselling and employee assistance for businesses on how to empower women in services; and ergonomic risk assessments the workplace, marketplace and community. and specialist equipment. Our WPP Stella network, now active in India, We estimate around 25% of our workforce Italy, Mexico, South Africa, Taiwan and the have ?exible working arrangements which UK, aims to tackle barriers that may prevent include part-time working, ?exible start and women progressing to the most senior roles. ?nish times and home working, as well as It runs events, networking opportunities, career breaks and sabbaticals. coaching and training as well as a speaker database to raise the internal and external pro?le of our senior women. A series of podcasts was launched in 2018 featuring some of our female leaders. The network will be rolled out to further markets during 2019. THE CAN BEST BE MEN AGENCY GREY NEW YORK CLIENT GILLETTE Gillette took a fresh look at what it means to be “the best” in today’s world, celebrating stories of men who challenge the culture of toxic masculinity. 110m RESULTS 15bn video views impressions January 2019- January 2019- February 2019 February 2019 Watch the video: wpp.com/bestmencanbe Recognition Industry for WPP Leader in the Bloomberg Gender-Equality Index To learn more about our programmes, including information about – Training programmes – Development programmes supporting career progression for our senior and mid-level women download our Sustainability Report 2018. wpp.com/sustainability WPP ANNUAL REPORT 2018 71

STRATEGIC REPORT SUSTAINABILITY ENVIRONMENT We recognise the major threat that climate and environmental change poses to global social and economic development. We support urgent action to tackle climate change through the Paris Agreement. As a result, we have environmental management programmes in place to reduce our carbon emissions and environmental impact and identify and mitigate climate-related risk in our operations. KEY TARGETS AND COMMITMENTS – 0.41 tonnes of CO2e per employee by 2030, a 50% reduction from 2017 – 50% of electricity from renewable sources by 2030 – 25% of global floor space certified to advanced green building standards by 2020 – 100% of emissions from air travel offset through the purchase of high-quality carbon credits TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) We support the Taskforce on Climate-related Financial Disclosures and aim to develop our disclosures in line with its recommendations. This voluntary framework seeks to encourage businesses to disclose climate-related risks and opportunities and is structured around four themes: governance, strategy, risk management, and metrics and targets. For our TCFD disclosure, see page 173 To learn more about our approach to environmental management, our full performance and our approach to carbon emissions accounting, download our Sustainability Report 2018. wpp.com/sustainability PERFORMANCE SUMMARY SCOPE 1 AND 2 EMISSIONS 2006-2018 CERTIFIED FLOORSPACE Tonnes CO2e/head (market-based) % 2.0 30 20 21 Headcount intensity 25 18 Revenue intensity 16 1.5 Target headcount intensity 20 13 1.0 0.74 15 10 0.5 6.40 5 0.41 06 10 14 18 22 26 30 2014 2015 2016 2017 2018 Our scope 1 and 2 market-based emissions for 2018 In 2018 21% of our ?oorspace was certi?ed were 0.74tCO2e/head, a 9% reduction from 2017. to advanced sustainability standards like Our carbon intensity per £1 million revenue was LEED and BREEAM. 6.40 tCO2e/head, an 8% reduction since 2017. PROPORTION OF ELECTRICITY FROM CARBON OFFSETS PURCHASED RENEWABLE SOURCES fCO2e % 30 96,577 98,885 92,445 89,518 26 85,459 21 22 14 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 We increased the percentage of electricity Since 2007 we have purchased and permanently purchased from renewable sources to 30% retired almost 1.5 million carbon credits to offset (2017: 26%), making substantial progress our carbon emissions from air travel. We offset towards our 50% target. 100% of our air travel emissions in 2018. 30% 0.74 21% A- electricity purchased tonnes of CO2e per ?oor space certi?ed rating for our climate from renewable person (target: to advanced green change strategy and sources (target: 0.41 tCO2e by 2030) building standards reporting in the CDP 50% by 2030) (target: 25% by 2020) climate change programme 72 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT SUPPLY CHAIN We work with over 130,000 companies Our Human Rights Policy Statement across our supply chain, and aim to select summarises our approach. It re?ects suppliers who meet high standards in areas international standards and principles, such as human rights and the environment. including the International Bill of Human Where we can, we work with our suppliers Rights, the UN’s Guiding Principles on to positively in?uence standards in the wider Business and Human Rights, the supply chain. This reduces risks to our International Labour Organization’s business and our clients and enables us to Declaration on Fundamental Principles and respond to the growing number of client Rights at Work and the Children’s Rights tender processes that include supply chain and Business Principles. management criteria. We are a member of the United Nations We take a risk-based approach to supplier Global Compact and report progress against engagement focusing on suppliers in its 10 principles annually. high-risk countries or sectors, those with whom we have a direct commercial Our most direct impact on human rights relationship and those with centrally is as a major employer. We recognise the negotiated contracts managed by our rights of our people including those relating procurement team. to freedom of association and collective bargaining and we do not tolerate SOURCING STANDARDS harassment or any form of forced, Our Supplier Code of Conduct includes compulsory or child labour. requirements relating to labour practices, See attracting and retaining talent, pages 70 and 71 human rights, social impacts as well as other sustainability issues. Our Code requires We work with clients to manage any human suppliers to apply similar standards to rights risks from marketing campaigns, for companies in their own supply chain. example by protecting children’s rights in relation to marketing. WPP companies will SUPPLIER SELECTION not undertake work designed to mislead We evaluate potential new suppliers on on human rights issues. factors such as assurance of supply, quality, service, cost, innovation and sustainability. MODERN SLAVERY We launched two additional sustainability We do not tolerate any form of modern questionnaires in 2018 to strengthen our due slavery, forced labour or human traf?cking in diligence processes for supplier selection. In any part of our business or supply chain. Our 2019 we plan to roll out new training for our risk assessment shows that almost 90% of procurement teams on conducting due our spend with preferred supplier partners is diligence for supply chain sustainability risks. in medium- or low-risk categories for modern slavery such as HR and professional services. HUMAN RIGHTS Higher-risk categories include facilities and Respect for human rights is a fundamental promotional goods suppliers. principle for WPP. We aim to prevent, identify and address any negative impacts SUPPLIER DIVERSITY on human rights associated with our We work with many small and diverse business activities. suppliers. In the US, around 2.1% of our spend is with certi?ed diverse suppliers including women- and minority-owned businesses. T-SHIRTS FIGHT SLAVERY THAT AGENCY HILL+KNOWLTON STRATEGIES, SÃO PAOLO CLIENT BRAZIL MINISTRY OF PUBLIC LABOR Slavery is a reality in Brazil, despite being illegal. #SomosLivres invites Brazilians to ?ght to protect this law. Leading fashion journalists and trendsetters received branded t-shirts during Fashion Week. 17m RESULTS 140,000 people reached mentions via print and November 2018- digital media January 2019 November 2018- January 2019 To learn more about our Supplier Code of Conduct, Human Rights Policy, and Modern Slavery Act Transparency Statement see: wpp.com/sustainability/ policies-and-resources WPP ANNUAL REPORT 2018 73

STRATEGIC REPORT SUSTAINABILITY TRANSPARENCY AND TRUST By establishing clear policies and procedures Breaches or alleged breaches of our Code in areas such as data security, ethical are investigated by the WPP legal and conduct, supply chain management and internal audit teams. Our people can report human rights, and reporting transparently concerns or suspected cases of misconduct on our progress, we can reduce risks to our in con?dence through our third party-business and to our clients. managed Right to Speak facility, overseen by our legal and compliance departments. OUR CODE OF CONDUCT We relaunched Right to Speak following the We set clear ethical standards for our people appointment of the new CEO in 2018 to and companies through our policy ensure all our people are aware of how they framework and training. can raise concerns. There were 200 reports (2017: 106) made via Right to Speak during The WPP Code of Business Conduct 2018, all of which were followed up, summarises our principles and key points investigated where appropriate and of policy that apply to everyone at WPP. reported to the Audit Committee. It is supported by more detailed policies in areas such as anti-bribery and corruption, ASSOCIATES, AFFILIATES AND hospitality and gifts, facilitation payments ACQUISITIONS and the use of third-party advisors as well We expect associate companies (those in as our Human Rights Policy Statement and which we hold a minority stake) and af?liate Sustainability Policy. companies (preferred partners to whom we may refer business) to adopt ethical Our online ethics training, How We Behave, standards that are consistent with our own. is updated every two to three years. Our people are required to take the training on Our due diligence process for acquisitions joining and on a regular basis, and repeat and expansion into new markets includes a the training following each update. Topics review of ethical risks including those relating covered include diversity, human rights, to bribery and corruption, human rights or con?icts of interest and avoiding misleading ethical issues associated with client work. work. In 2018, we added unconscious bias training, and updated our ethics and We identify any speci?c human rights risks anti-bribery and corruption training. Over associated with different countries of 115,000 employees have completed the operation, using sources such as the training since this update. Transparency International Corruption Index, Human Rights Watch country reports and Our online training on anti-bribery and government guidance. corruption covers the Foreign Corrupt Practices Act and UK Bribery Act on Acquired businesses must adopt our policies issues such as hospitality and gifts, and their people must undertake our ethics facilitation payments and the use of training within a month of joining the third-party advisors. Company. This is included in the integration plan agreed before the acquisition is ?nalised MANAGEMENT AND COMPLIANCE and we monitor progress after acquisition. Our Group Chief Counsel and Head of Sustainability oversees our approach to PUBLIC POLICY ethics and compliance. Senior managers We are involved in public policy activity in all our companies and our business and in two ways. Our public affairs businesses supplier partners are asked to sign a copy carry out work for clients, including direct of the WPP Code of Business Conduct lobbying of public of?cials and in?uencing each year to con?rm they will comply public opinion. On occasion, we also engage with its principles. in the public policy process on issues that affect WPP and our companies. 115,000+ people completed refreshed ethics training in 2018 74 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT We believe that business can make a We will not undertake work that is LOBBYING AND POLITICAL ADVOCACY valuable contribution to the debate on intended or designed to mislead. We do We occasionally contribute to the debate regulation and government policy. However, not knowingly represent “front groups” public policy issues relevant to our business, to protect the public interest, it is important (organisations which purport to be sometimes operating through our public that business lobbying is conducted with independent NGOs but are controlled by affairs companies. honesty, integrity and transparency. another organisation for the purpose of misleading) and seek to ensure we are We engage in partnerships and advocacy The majority of our work takes place in the aware of who the underlying client is sustainability issues, for example through US and the EU, although many clients are before taking on work. Common Ground initiative in support of the multinational businesses. UN Global Goals. Karen Blackett OBE, WPP Our Group Chief Counsel and Head of UK Country Manager and Chairwoman of OUR STANDARDS Sustainability has responsibility for MediaCom UK & Ireland, is serving as the Our political activities are governed by our development and implementation of our UK Government’s Race at Work Champion, Code of Business Conduct and our Political political activity policy and public reporting supporting the Race at Work Charter. Activities and Engagement Policy, both procedures. Our Chief Talent Of?cer had available on our website. These commit overall responsibility for implementation Our companies also contribute to public us to acting ethically in all aspects of our of this policy within our public affairs debate in areas where they have expertise business and to maintaining the highest companies. The CEO and CFO in each and a special interest – our digital and standards of honesty and integrity. country or region are responsible for research companies, for example, are involved Political activities should be conducted implementing this policy at the local level. on privacy and data protection issues. legally, ethically and transparently. All communication should be honest, factual Any third parties conducting political WPP companies must implement clear and accurate. Our policies apply to all activities on behalf of WPP or its procedures for the employment of serving employees, Directors and entities. companies must comply with our or former politicians. This includes, for Political Activities and Engagement Policy. example, a six-month “cooling-off” period Many of our companies are members of Third parties should complete the WPP for people joining WPP from public of?ce professional organisations and abide by ethics training or equivalent training within or the public sector. their codes of conduct. Examples include their own organisation. the UK’s Association of Professional Political MEMBERSHIP OF TRADE ASSOCIATIONS Consultants (APPC), the self-regulatory body POLITICAL CONTRIBUTIONS We are members of trade associations, for UK public affairs practitioners, and the WPP companies are not permitted to make industry groups and membership European Public Affairs Consultancies’ direct cash donations. Other political organisations which undertake lobbying Association (EPACA), the representative donations can only be made with the prior activity on behalf of their members. It is trade body for public affairs consultancies written approval of a WPP Executive important that we select organisations working with EU institutions. Director. Donations must be reported to whose priorities and values are aligned with WPP legal before they are made to con?rm our own and which have robust governance WPP companies comply with all applicable they comply with this policy and to obtain processes. WPP companies must nominate laws and regulations governing the the necessary approvals. a senior manager with responsibility for disclosure of public affairs activities. In the managing and overseeing trade association US, this includes the Lobby Disclosure Act POLITICAL ACTION COMMITTEES relationships. Memberships are listed in our and the Foreign Agent Registration Act, In countries where it is consistent with full Sustainability Report 2018. which are designed to achieve transparency applicable law, individuals working at WPP on client representation and require lobby companies may make personal voluntary ?rms to register the names of clients on political contributions directly to candidates whose behalf they contact legislators or for of?ce. Several of our businesses, executive branch personnel. A number of our including Burson Cohn & Wolfe/Prime Policy, companies are listed on the voluntary EU Glover Park Group and Hill+Knowlton Transparency Register of lobbying activities. Strategies, also maintain political action committees (PACs) which accept voluntary It is WPP’s practice that those of its US donations from their people to support companies whose sole or primary business is political candidates. In 2017 and 2018, these lobbying have representatives of both major PACs made disbursements worth $307,948. political parties among senior management. WPP ANNUAL REPORT 2018 75

STRATEGIC REPORT SUSTAINABILITY DATA PRIVACY ETHICS AND Data – including consumer data – can play an Privacy leads in our companies oversee the We have developed a range of materials essential role in our work for clients. We have implementation of our policies at a local to help our companies communicate our a responsibility to look after this data level. They report progress to the Company approach to clients including during pitches carefully, to collect data only when needed via our Group Chief Counsel and Group and contract negotiations. Our Chief Privacy and with consent where required, and to Chief Privacy Of?cer. Each of our networks Of?cer also meets with clients to explain our store and transfer data securely. has appointed privacy leads to oversee approach and share insights and privacy data practices. best practices. Data security and privacy are increasingly high-pro?le topics for regulators, consumers AUDIT AND DUE DILIGENCE We partner with clients, industry and our clients. Our Group Chief Privacy Of?cer and Data organisations and peer companies on Protection Of?cer are working with our privacy issues. For example, we are We focus on building our people’s awareness internal audit team to review privacy risks working with the Internet Advertising and knowledge so everyone understands and practices as part of our Company-wide Bureau (IAB) in Europe, contributing to and takes responsibility for data privacy and audit programme. work on their Transparency and Consent security. We have robust standards and Framework which aims to help all parties governance processes in place to reduce Any supplier who collects, manages or in the digital advertising chain comply risks and comply with regulation. We partner stores employee, consumer or client with the increased consent requirements with clients, peers and industry organisations data on behalf of WPP, our companies of the GDPR. to promote best practice. and our clients must have the right data security and privacy standards in place. DATA HEALTH CHECKER We reviewed, and where necessary We conduct due diligence on data We use our Data Health Checker to review updated, all our policies, processes and suppliers and embed privacy requirements privacy risks and data security practices in training to respond to the EU’s General Data in our supplier contracts. our businesses. This provides us with insight Protection Regulation (GDPR), which came into how data is used, stored and transferred into force in 2018, and we are reviewing on TRAINING AND ENGAGEMENT and helps to identify any parts of the an ongoing basis pending global privacy Our Safer Data platform provides business that need further support on data laws such as those which will come into information, guidance and resources to practices. The results showed that the force in Brazil and California. help our people understand privacy risks majority of our companies have mitigation and to apply our policies to their work. measures that match or exceed their level of POLICIES AND GOVERNANCE We have expanded its scope to include privacy risk, with the average risk score In 2018, we launched WPP’s Data Privacy and additional resources on data privacy and being 2.16 out of 5, where 5 is the Security Charter to help us communicate our security including guidance on: recognising maximum score possible indicating approach to data to our people and our “phishing” and similar techniques; looking maximum risk. Of those companies surveyed, clients. This brings together our Data Code after data valuables; and communicating 80% have a dedicated privacy lead. of Conduct, which sets out core principles with clients on WPP’s data security and for responsible data management, with our privacy practices. IT security, privacy and social media policies, and our security standards (which are based The platform also includes our GDPR toolkit, on ISO 27001). It also includes our acceptable which contains guidance notes, model data use, data handling and retention, business protection contract clauses, template continuity, incident response and subject privacy impact assessment tools, policy access policies. Many of the policies have templates and other resources, and we will been rewritten to make them clearer and be including additional resources to deal more accessible to a wide audience. with privacy laws coming into force globally. Our Group Chief Privacy Of?cer leads our We updated our mandatory global online work on privacy and partners with our Privacy and Data Security Awareness companies and security and audit teams to training in 2018. The updated training has promote privacy best practices. We been completed by 111,747 employees. 111,747 appointed a Data Protection Of?cer in 2018 Our team also ran face-to-face training for people completed updated whose role is: to provide practical guidance around 50 of our operating companies online Privacy and Data Security and support to our agencies on data ethics; covering GDPR compliance and privacy Awareness training in 2018 ensure that privacy risks are well understood best practices. across the business; help us prepare for new data and privacy regulation; and promote best practices. 76 WPP ANNUAL REPORT 2018

SUSTAINABILITY STRATEGIC REPORT TO OUR SUSTAINABILITY APPROACH SUSTAINABILITY GOVERNANCE INVESTOR ENGAGEMENT NON-FINANCIAL Paul Richardson, WPP’s Group Finance We engaged with investors, rating INFORMATION STATEMENT Director, was the Board Director responsible agencies and benchmarking organisations This section (pages 60-77) provides for sustainability in 2018. Andrea Harris, on sustainability during 2018 including: information required by regulation in Group Chief Counsel and Head of Bloomberg Gender-Equality Index; CDP; relation to: – Environmental matters Sustainability, has operational responsibility Ecovadis; Ethibel; Euronext Vigeo Europe; – Our people for sustainability. FTSE Russell; Human Rights Campaign – Social matters Foundation’s 2018 Corporate Equality – Human rights At Board level, the Nomination and Index; ISS Data Veri?cation; MSCI – Corruption and bribery Governance Committee has responsibility Research Inc; Sustainalytics; Thomson for sustainability. We have established a Reuters D&I index; Trucost; and Workforce In addition, other related information Charity Committee to oversee our donations Disclosure Initiative (WDI). can be found as follows: and pro bono work (see page 68). – Business model (page 40) We are included in the FTSE4Good Index and – Principal risks and how they are managed (pages 78-83) Environmental, social and governance (ESG) participate in the CDP climate benchmark, – Non-financial key performance risks are integrated into the Company’s receiving a rating of A- in 2018 (2017: B). indicators (page 6) assessment of principal risks which are set out in detail from page 78. OUR MATERIALITY PROCESS Our ?rst formal materiality assessment in EMBEDDING SUSTAINABILITY IN OUR 2014 included interviews with clients, COMPANIES investors, NGOs and sustainable business WPP sets sustainability policy, with every experts as well as senior executives in the company responsible for implementation. centre and our operating companies. The Company has a clear policy framework Further reviews were conducted in 2016 through our Code of Business Conduct, and 2017, and we plan to update our Sustainability Policy, Supplier Code of materiality assessment in light of our new Conduct, Data Code of Conduct and Human corporate strategy. Our reporting focuses Rights Policy Statement and other policies on the issues identi?ed as being of high or included in the WPP Policy Book. We track medium importance. progress using our social and environmental key performance indicators. ABOUT OUR REPORTING Data included in this review is for the Our internal sustainability advisors are calendar year 2018 and covers all subsidiaries working to ensure consistent implementation of the Company. Some key environmental of our standards and ESG risks are included and people data is veri?ed by Bureau Veritas, in our programme of internal audits. an independent assurance provider. STAKEHOLDER ENGAGEMENT Dialogue with our stakeholders, including our people, clients and investors, provides valuable feedback and insight into sustainability risks and opportunities, for our Company and our clients. Most stakeholder engagement takes place in the course of doing business. We also carry out more formal research as part of our materiality process. We work with clients on sustainability issues (see page 66). Information on employee engagement is To ?nd further details, data, on page 70. our materiality analysis and case studies download our full Sustainability Report 2018. wpp.com/sustainability WPP ANNUAL REPORT 2018 77

STRATEGIC REPORT ASSESSING MANAGING AND OUR RISKS RISK MANAGEMENT AND obligations in our supply chain. Our Policy RISK ASSESSMENT INTERNAL CONTROL Book includes required practices in many We use a “three lines of defence” model The success of our strategic objectives operational, tax, legal and human in relation to risk management: discussed in this report depends to a resource areas. signi?cant extent on understanding and COMPANY REVIEWS responding to the risks we face. The Board, Breaches of our Code are investigated by 1. Each company undertakes monthly and assisted by the Audit Committee, has overall our legal and business integrity teams and quarterly procedures and day-to-day responsibility for the system of our internal external advisors where appropriate. management activities to review their control and risk management. It has operations and business risks, supported reviewed the design and effectiveness of We relaunched our independently by our policies, training and guidance on the system during the year and up to the operated helpline, Right to Speak, in 2018. required internal controls over financial date of this report and carried out a robust We encourage a culture of transparency and reporting and monitoring controls and assessment of the principal risks we face. integrity and part of this culture is making reviews within their network. The system of controls described below is sure our people and stakeholders have the designed to manage and mitigate, but may con?dence to speak up and raise concerns EXECUTIVE MANAGEMENT REVIEWS not eliminate, the risks of failure to achieve if they experience or hear about behaviour 2. The reviews are formally communicated to our strategic objectives and is not an which con?icts with the principles stated in executive management in monthly reports absolute assurance against material our Code. In 2018 we saw an increase in the and quarterly review meetings and, in turn, misstatement or loss. number of issues raised to us through Right to the Board. At each Board meeting, the to Speak. There were 200 reports (2017: 106), management team presents a business CONTROL, CULTURE AND all of which have been followed through, review of each of the operations, including ANTI-BRIBERY AND CORRUPTION investigated and disciplinary action taken an assessment of the risks in each The quality and competence of our people, where appropriate, and the details reported business, and details of any change in the their integrity, ethics and behaviour and the to the Audit Committee. risk profile since the last Board meeting. culture embedded within our businesses The business review includes the are all vital to the maintenance of our The Compensation Committee continues to possibility of winning or losing major system of internal control which is review how the Group’s performance business; succession and the addition maintained and reviewed in accordance rewards support the risk management and or loss of a key employee; regulatory with the UK Corporate Governance Code internal control systems. changes; sustainability, including risks and FRC guidance on risk management relating to marketing ethics, privacy, and internal control. CONTROL ACTIVITIES diversity and employment; political AND MONITORING instability; and changes in accounting Our Code of Business Conduct, which is Our policies and procedures are set out and or corporate governance practice. regularly reviewed by the Board, sets out the communicated in our Policy Book, internal principal obligations of all of our people. Our control bulletins and accounting guidelines. INTERNAL AUDIT AND AUDIT senior managers are required to sign our The application of these policies and COMMITTEE OVERSIGHT Code each year and all employees are procedures is monitored within each 3. The internal audit function, with Audit required on joining, and at regular intervals, company and by the internal audit, legal Committee oversight and external to complete the How We Behave, Anti- and compliance functions. resource as required, provides an Bribery & Corruption and Privacy & Data independent review of risk management Security Awareness training courses, which Our companies must maintain and update and internal control via internal audits embed all of the principles of the Code in documentation of their internal controls and and management of the testing addition to individual training programmes. processes. This documentation incorporates programme for SOX. Our Anti-Bribery & Corruption Policy an analysis of business risks, detailed control prohibits any form of bribery across the activities and monitoring, together with IT Group and is supported by the Advisor and ?nancial controls and controls over Payment Policy which restricts the use of security of data and the provision of timely advisors and details the due diligence that and reliable information to management. must be undertaken in the limited cases where advisors may be used. Our gifts and The internal audit function was responsible entertainment policy sets limits on values for reviews and testing of the documentation that may be given or received, supported in and the relevant controls for a majority of the each company by a gift register. Our Code businesses during 2018 and the results of Conduct for suppliers replicates these reported to the Audit Committee. 78 WPP ANNUAL REPORT 2018

RISK STRATEGIC REPORT FINANCIAL REPORTING At each year-end, all companies supply their PRINCIPAL RISKS AND UNCERTAINTIES Each company annually updates a three-year full-year ?nancial results. This information is The Board has carried out a robust strategic plan, which incorporates ?nancial consolidated to allow the Group to present assessment of the principal risks and objectives. These are reviewed by executive the necessary disclosures for International uncertainties affecting the Group and management and are agreed with the Chief Financial Reporting Standards (IFRS) as the markets we operate in and strategic Executive of the relevant company. adopted by the European Union and issued decisions taken by the Board as at by the IASB. 31 December 2018 and up to the date We operate a rigorous procedure for the of this report and which are described development of company budgets, which The Disclosure Committee gives further in the table on the following pages. build up the Group’s budget. During the final assurance that publicly-released information quarter of each ?nancial year, operating is free from material omission or A risk dashboard and map are discussed companies prepare detailed budgets for the misstatement. regularly by the Audit Committee and following year for our review. The Group’s bi-annually by the Board. budget is reviewed by the Board before RISK REVIEW AND RISK APPETITE being adopted formally. Company results are The Audit Committee instigated a review reported monthly and are reviewed locally, of risk management in 2018 to evolve our regionally and globally by the business enterprise risk management process. groups and by Group management on a Risk Committees are being established at consolidated basis and ultimately by the network level during 2019, the ?rst of Board. The results are compared to budget which has been formed at GroupM, and and the previous year, with full-year forecasts risk assessments conducted with the aim prepared and updated quarterly throughout of ensuring accountability at network level the year. to monitor risk and compliance. Risk appetite statements, drivers and tolerances will be ?nalised with the Audit Committee during 2019 and new technology implemented for monitoring and tracking risks. VIABILITY STATEMENT RISK ASSESSMENT VIABILITY STATEMENT This period has been chosen as it aligns with our ASSESSMENT OF PROSPECTS The Directors’ assessment of the Group’s viability three-year transformation programme and An understanding of the Group’s business model for the next three years has been made with strategic plan and budgets. Sensitivity analysis has and strategy is key to understanding its prospects reference to: been applied to re?ect the potential impact of and this has been discussed in detail from page 40. – the Group’s current position and prospects; one or a combination of the principal risks on the – the transformation programme detailed in Group and consequential contract breach, loss of The Group’s business model, transformation this report; reputation, client loss and inability to win new programme and diversi?cation across marketing – the short-term notice periods or assignment business and the impact of revenue loss. communication services sectors which operate nature of many of the client contracts; in 112 countries worldwide and with a broad – the volatility of global economic conditions and GOING CONCERN spectrum of clients and suppliers, provide uncertainty for our clients and people created The Directors are required to consider whether resilience which is relevant to any consideration by Brexit; it is appropriate to prepare the ?nancial statements of prospects and viability. – the changing competitive landscape; on the basis that the Company and the Group are – the long-term impact of technological going concerns. As part of its normal business The Directors assess the Group’s prospects on disruption; practice, the Group prepares annual and a regular basis through the ?nancial reporting and – the need for simplification of the Group longer-term plans and in reviewing this information planning process which is detailed above, the structure and integrated service offering to and, in particular, the three-year plan and business reviews which take place at each Board clients; and budget, the Directors believe that the Company meeting, quarterly reviews of our businesses by – the Company’s ability to achieve the stated and the Group have adequate resources for the the executive team and ongoing reviews of the dividend policy and cover interest payments foreseeable future. Therefore, the Company and Group’s profitability, cash flows and funding on the Group’s debt. the Group continue to adopt the going concern requirements. The Board considers the longer-term basis in preparing the ?nancial statements. risks and opportunities for the Group discussed in the strategic report and the potential impact of economic volatility, competition for talent and competition from consulting ?rms, technological disruption and regulation. WPP ANNUAL REPORT 2018 79

STRATEGIC REPORT RISK HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISKS POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES CLIENTS We compete for clients in a highly-competitive The competitive landscape in our industry is Three-year transformation plan commenced in and evolving industry which is undergoing constantly evolving and the role of traditional December 2018. Emphasis on providing faster, structural change. Client loss to competitors or agencies is being challenged. Competitors more agile and more effectively integrated as a consequence of client consolidation or a include multinational advertising and marketing solutions for our clients. reduction in marketing budgets due to economic communication groups, regional and national conditions or a shift in client spending may have marketing services companies, database Continue to simplify our organisational a material adverse effect on our market share, marketing information and measurement, social structure such as the creation of VMLY&R and business, revenues, results of operations, media and professional services and consultants Wunderman Thompson and the disposal of ?nancial condition or prospects. and consulting internet companies. non-core minority holdings. Client contracts can generally be terminated on Launch of further Campus co-locations. 90 days’ notice or are on an assignment basis and Embedding data and technology more deeply clients put their business up for competitive into our offer to clients. review from time to time. The ability to attract new clients and to retain or increase the amount CEO focus on the importance of a positive and of work from existing clients may be impacted if inclusive culture across our business to attract we fail to react quickly enough to changes in the and retain talent and clients. market and to evolve our structure and by loss of reputation and may be limited by clients’ policies Continuous improvement of our creative on con?icts of interest. capability and reputation of our businesses. The global economy continues to be volatile with The development and implementation of senior uncertainties such as those caused by Brexit in incentives to align more closely with our strategy the UK and Europe and technological disruption and performance. from disintermediators. In the past clients have responded to weak economic and ?nancial Business review at every Board meeting to conditions by reducing or shifting their marketing identify the potential risk of client loss. budgets which are easier to reduce in the short term than their other operating expenses. The risk Formation of new central team with key of client loss or reduction in marketing budgets appointments including Chief Client Of?cer, Chief has increased. Technology Of?cer and Chief Operating Of?cer. We receive a signi?cant portion of our revenues A relatively small number of clients contribute a Increase ?exibility in the cost structure (including from a limited number of large clients and the signi?cant percentage of our consolidated incentives, consultants and freelancers). net loss of one or more of these clients could revenues. Our 10 largest clients accounted for have a material adverse effect on our 14.4% of revenues in the year ended 31 December Business review at every Board meeting and prospects, business, ?nancial condition 2018. Clients can reduce their marketing spend, regular engagement at executive level with and results of operations. terminate contracts, or cancel projects on short our clients. notice. The loss of one or more of our largest clients, if not replaced by new accounts or an increase in business from existing clients, would adversely affect our ?nancial condition. KEY Increased risk No change from last year Reduced risk New risk in 2018 80 WPP ANNUAL REPORT 2018

RISK STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISKS POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES CYBER AND DATA SECURITY We are subject to strict data protection and We may be subject to investigative or We develop principles on privacy and data privacy legislation in the jurisdictions in which we enforcement action or legal claims or incur ?nes, protection and compliance with local laws. operate and rely extensively on information damages, or costs and client loss if we fail to We implemented extensive training ahead of technology systems. We store, transmit and rely adequately protect data or observe privacy GDPR implementation in 2018 and the roll out on critical and sensitive data such as strategic legislation in every instance. A system breakdown of a GDPR toolkit to assist our people to prepare plans, personally identi?able information and trade or intrusion could have a material adverse effect for implementation and will do the same as new secrets. Security of this type of data is exposed to on our business, revenues, results of operations, legislation is adopted in other markets. escalating external threats that are increasing in ?nancial condition or prospects. sophistication, as well as internal data breaches. A Chief Privacy Of?cer and Data Protection Of?cer have been appointed at the Company and Existing and new data protection laws, GDPR and Data Protection Of?cers are in place at a number e-privacy regulation in the EU concerning user of our companies. privacy, use of personal information, consent and online tracking may restrict some of our activities Our people must take Privacy & Data Security and increase costs. Awareness training and understand the WPP Data Code of Conduct and WPP policies on data We are part way through an IT transformation privacy and security. project and rely on third parties for the performance of a signi?cant portion of our The Data Health Checker survey is performed worldwide information technology and annually to understand the scale and breadth of operations functions. A failure to provide these data we collect so the level of risk associated with functions could have an adverse effect on our this can be assessed. business. During the transformation, we are still reliant on legacy systems which could restrict our The IT transformation project will enhance our ability to change rapidly. data security. In addition, we have established a global internal IT company responsible for providing core IT shared services to our companies and manage external technology providers. FINANCIAL We are subject to credit risk through the default We are generally paid in arrears for our Evaluating and monitoring clients’ ongoing of a client or other counterparty. services. Invoices are typically payable within creditworthiness and in some cases requiring 30 to 60 days. credit insurance or payments in advance. We commit to media and production purchases Our treasury position is a recurring agenda item on behalf of some of our clients as principal or for the Audit Committee and the Board. agent depending on the client and market circumstances. If a client is unable to pay sums We are cash generative and working capital due, media and production companies may look management remains a key focus for the Board. to us to pay those amounts. WPP ANNUAL REPORT 2018 81

STRATEGIC REPORT RISK HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISKS POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES OPERATIONAL Our performance could be adversely Failure to ensure that trading activities are Transparency and contract compliance are impacted if we failed to ensure adequate compliant with client obligations could adversely embedded through the networks and reinforced internal control procedures are in place in impact client relationships and business volumes. by audits at a WPP and network level. relation to media trading. Regular monitoring of key performance indicators for trading are undertaken to identify trends and issues. An authorisation matrix on inventory trading is agreed with the Company and the Audit Committee. We have commenced a three-year strategic plan A failure or delay in implementing the Board oversight of the implementation of the to return the business to growth by the end of transformation plan may have a material adverse transformation plan. 2021 which includes the merger of some effect on our market share and our business, operations, disposals and the simpli?cation of revenues, results of operations, ?nancial condition Formation of new central team with key our structure. or prospects. appointments including Chief Client Of?cer, Chief Technology Of?cer and Chief Operating Of?cer. PEOPLE AND SUCCESSION Our performance could be adversely affected if We are highly dependent on the talent, creative Our incentive plans are structured to provide we do not react quickly enough to changes in our abilities and technical skills of our personnel as retention value, for example by paying part of market and fail to attract, develop and retain key well as their relationships with clients. We are annual incentives in shares that vest two years after creative, commercial and management talent. vulnerable to the loss of personnel to competitors grant date. (traditional and emerging) and clients, leading to disruption to the business. We are working across the businesses to embed collaboration and investing in training and development to retain and attract talented people. The investment in co-located properties is increasing the co-operation across our companies and provides extremely attractive and motivating working environments. Succession planning for the Group Chief Executive, the Group Finance Director and key executives of the Company is undertaken by the Board and Nomination and Governance Committee on a regular basis and a pool of potential internal and external candidates identi?ed in emergency and planned scenarios. Compensation Committee oversight for the Group’s incentive plans and compensation. KEY Increased risk No change from last year Reduced risk New risk in 2018 82 WPP ANNUAL REPORT 2018

RISK STRATEGIC REPORT HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISKS POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES REGULATORY, SANCTIONS, ANTI-TRUST AND TAXATION We may be subject to regulations restricting our Changes in local or international tax rules, for We actively monitor any proposed regulatory or activities or effecting changes in taxation. example prompted by the OECD’s Base Erosion statutory changes and consult with government and Pro?t Shifting project (a global initiative to agencies and regulatory bodies where possible on improve the fairness and integrity of tax systems), such proposed changes. changes arising from the application of existing rules, or new challenges by tax or competition Annual brie?ngs to the Audit Committee of authorities, for example, the European signi?cant changes in tax laws and their application Commission’s State Aid investigation into the UK and regular brie?ngs to executive management. CFC rules, may expose us to signi?cant additional We engage advisors and legal counsel to obtain tax liabilities or impact the carrying value of our opinions on tax legislation and principles. deferred tax assets, which would affect the future tax charge. We are subject to strict anti-corruption, We operate in a number of markets where the Online and in-country ethics, anti-bribery, anti-bribery and anti-trust legislation and corruption risk has been identi?ed as high by corruption and anti-trust training on a Group-wide enforcement in the countries in which we groups such as Transparency International. Failure basis to raise awareness and seek compliance with operate. to comply or to create a culture opposed to our Code of Conduct and the Anti-Bribery & corruption or failing to instil business practices Corruption Policy. that prevent corruption could expose us to civil and criminal sanctions. Extension of our business integrity internal function to ensure compliance with our codes and policies and remediation of any breaches of policy. Relaunch of the Right to Speak con?dential, independently operated helpline for our people and stakeholders to raise any potential breaches of our Code and policies, which are investigated and reported to the Audit Committee on a regular basis. Due diligence on acquisitions and on selecting and appointing suppliers and restrictions on the use of third-party consultants in connection with any client pitches. The establishment during 2019 of Risk Committees across the networks to monitor risk and compliance at the network level and the enhancement of our business integrity function across our markets. Gift and hospitality register and approvals process. We are subject to the laws of the US, the EU and Failure to comply with these laws could expose us Online training to raise awareness and seek other jurisdictions that impose sanctions and to civil and criminal penalties including ?nes and compliance and updates to our companies regulate the supply of services to the imposition of economic sanctions against us on any new sanctions. certain countries. and reputational damage and withdrawal of banking facilities which could materially impact Regular brie?ngs to the Audit Committee and our results. constant monitoring by the WPP legal team with assistance from external advisors of the sanctions regimes. WPP ANNUAL REPORT 2018 83

FINANCIAL STATEMENTS 120 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS Accounting policies 122 Consolidated ?nancial statements 127 Notes to the consolidated ?nancial statements 132 Company ?nancial statements 158 Notes to the Company ?nancial statements 161 Independent auditor’s report 163 WPP ANNUAL REPORT 2018 121

FINANCIAL STATEMENTS ACCOUNTING POLICIES ACCOUNTING POLICIES The consolidated financial statements of WPP plc and its subsidiaries (the IMPACT OF THE ADOPTION OF IFRS 9 FINANCIAL INSTRUMENTS Group) for the year ended 31 December 2018 have been prepared in The Group has adopted IFRS 9 Financial Instruments from 1 January 2018 which accordance with International Financial Reporting Standards (IFRS) as adopted resulted in the movements in fair value of certain equity investments by the European Union as they apply to the financial statements of the Group previously designated as ‘available-for-sale’ being designated as fair value for the year ended 31 December 2018. through other comprehensive income or fair value through profit or loss. The cumulative movements in fair value taken to equity up to 31 December 2017 for The Group’s financial statements have also been prepared in accordance with these investments have been transferred from other reserves to retained International Financial Reporting Standards as issued by the International earnings, resulting in an increase in retained earnings of £407.4 million and a Accounting Standards Board. corresponding decrease in other reserves. BASIS OF PREPARATION Amounts classified as loans and receivables under IAS 39 Financial Instruments: The consolidated financial statements have been prepared under the historical Recognition and Measurement have been reclassified to amortised cost under cost convention, except for the revaluation of certain financial instruments. IFRS 9. Further details on reclassification are set out in note 24. The principal accounting policies are set out below. The requirement under IFRS 9 to use an expected loss method of impairment BASIS OF CONSOLIDATION of financial assets did not have a material effect on the Group due to the The consolidated financial statements include the results of the Company short-term nature of the Group’s trade and other receivables, which are mainly and all its subsidiary undertakings made up to the same accounting date. due from large national or multinational companies. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. The results of subsidiary undertakings acquired or The Group continues to apply the hedge accounting requirements of IAS 39, disposed of during the period are included or excluded from the consolidated as permitted by IFRS 9. income statement from the effective date of acquisition or disposal. Comparatives have not been restated in accordance with the transitional NEW IFRS ACCOUNTING PRONOUNCEMENTS guidance in IFRS 9 and the cumulative impact of adopting the standard on At the date of authorisation of these financial statements, the following reserves at 1 January 2018 is shown in the consolidated statement of changes Standards, which have not been applied in these financial statements, in equity. were in issue but not yet effective: – IFRS 16 Leases; and IMPACT OF THE ADOPTION OF IFRS 15 REVENUE FROM CONTRACTS – IFRIC 23 Uncertainty over Income Tax Treatments. WITH CUSTOMERS The Group has adopted IFRS 15 Revenue from Contracts with Customers from IFRS 16 is effective from 1 January 2019. The standard eliminates the 1 January 2018 which resulted in changes in certain aspects of our accounting classification of leases as either operating or finance leases and introduces a policies and adjustments to the amounts recognised in the financial single accounting model. Lessees will be required to recognise a right-of-use statements. In accordance with the transition provisions in IFRS 15, the Group asset and related lease liability for the majority of their operating leases and has adopted the new rules retrospectively and has restated comparatives for show depreciation of leased assets and interest on lease liabilities separately each prior year presented in the consolidated financial statements. in the income statement. IFRS 16 will require the Group to recognise substantially all of its operating leases on the balance sheet. The new standard establishes a five-step model where consideration received or expected to be received is recognised as revenue when The Group will adopt IFRS 16 effective 1 January 2019 on a modified contractual performance obligations are satisfied by transferring control of retrospective basis and apply the standard retrospectively with the cumulative the relevant goods or services to the customer. Adopting IFRS 15 did not have effect of initially applying the standard recognised at the date of initial a significant impact on the timing of the Group’s revenue recognition nor on application as an adjustment to retained earnings. Accordingly, prior year the Group’s equity. financial information will not be restated and will continue to be reported under IAS 17 Leases. The right-of-use asset and lease liability will initially be However, for certain of our contracts, the adoption of IFRS 15 resulted in a measured at the present value of the remaining lease payments, with the change in our accounting for certain third-party costs. Third-party costs are right-of-use asset being subject to certain adjustments. The estimated included in revenue when the Group acts as principal with respect to the right-of-use asset and lease liability recorded on the balance sheet as of 1 services provided to the client and are excluded when the Group acts as agent. January 2019 will be approximately £2.0 billion to £2.5 billion. Depreciation of Under IFRS 15, the principal versus agent assessment is based on whether the the right-of-use asset and recognition of interest on the lease liability in the Group controls the relevant services before they are transferred to the client. As income statement will replace amounts recognised as rent expense under IAS a result of the adoption of IFRS 15, there was an increase in third-party costs 17, resulting in an estimated increase to operating margin of approximately 0.4 included in revenue and costs of services. This change increased revenue and to 0.6 margin points and an estimated decrease to diluted earnings per share costs of services by the same amount and therefore had no impact on gross of approximately 1.3p to 1.6p. profit or operating profit. IFRIC 23 is effective from 1 January 2019. The Group does not consider that this The following table summarises the impact of adopting IFRS 15 on the Group’s Standard will have a significant impact on the financial statements of the Group. consolidated income statement for the years ended 31 December 2017 and 2016. In the current year, the following Standards and Interpretations became effective: – IFRS 9 Financial Instruments; and – IFRS 15 Revenue from Contracts with Customers. Year ended 31 December 2017 Year ended 31 December 2016 As previously IFRS 15 As As previously IFRS 15 As £ million reported adjustments restated reported adjustments restated Revenue 15,265.4 538.8 15,804.2 14,388.9 498.4 14,887.3 Costs of services (12,090.2) (538.8) (12,629.0) (11,348.1) (498.4) (11,846.5) Gross pro?t 3,175.2 – 3,175.2 3,040.8 – 3,040.8 Revenue less pass-through costs 13,139.6 30.0 13,169.6 12,397.8 30.8 12,428.6 122 WPP ANNUAL REPORT 2018

ACCOUNTING POLICIES FINANCIAL STATEMENTS Work in progress includes outlays incurred on behalf of clients, including carrying value. Depreciation is provided at rates calculated to write off the cost production costs, and other third-party costs that have not yet been billed less estimated residual value of each asset on a straight-line basis over its and are considered receivables under IFRS 15. As such, £401.1 million of ‘Work estimated useful life, as follows: in progress’ has been reclassified as ‘Trade and other receivables’ as of – Freehold buildings – 50 years. 31 December 2017. Other than this reclassification, the impact of the – Leasehold land and buildings – over the term of the lease or life of the adoption of IFRS 15 on the consolidated balance sheet, consolidated cash flow asset, if shorter. statement, consolidated statement of changes in equity and earnings per – Fixtures, fittings and equipment – 3-10 years. share was immaterial. – Computer equipment – 3-5 years. GOODWILL AND OTHER INTANGIBLE ASSETS INTERESTS IN ASSOCIATES AND JOINT VENTURES Intangible assets comprise goodwill, certain acquired separable corporate An associate is an entity over which the Group has significant influence. brand names, acquired customer relationships, acquired proprietary tools In certain circumstances, significant influence may be represented by factors and capitalised computer software not integral to a related item of hardware. other than ownership and voting rights, such as representation on the Board of Directors. Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying The Group’s share of the profits less losses of associate undertakings net of net assets, including intangible assets, at the date of their acquisition. tax, interest and non-controlling interests is included in the consolidated income statement and the Group’s share of net assets is shown within Goodwill impairment reviews are undertaken annually or more frequently interests in associates in the consolidated balance sheet. The Group’s share if events or changes in circumstances indicate a potential impairment. The of the profits less losses and net assets is based on current information carrying value of goodwill is compared to the net present value of future cash produced by the undertakings, adjusted to conform with the accounting flows derived from the underlying assets using a projection period of up to policies of the Group. five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the The Group assesses the carrying value of its associate undertakings to industry is applied. Any impairment is recognised immediately as an expense determine if any impairment has occurred. Where this indicates that an and is not subsequently reversed. investment may be impaired, the Group applies the requirements of IAS 36 in assessing the carrying amount of the investment. This process includes Corporate brand names, customer relationships and proprietary tools comparing its recoverable amount with its carrying value. acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial The Group accounts for joint venture investments under the equity method recognition and it is probable that the expected future economic benefits that which is consistent with the Group’s treatment of associates. are attributable to the asset will flow to the Group. OTHER INVESTMENTS Certain corporate brands of the Group are considered to have an indefinite The Group has adopted IFRS 9 Financial Instruments from 1 January 2018 which economic life because of the institutional nature of the corporate brand resulted in the movements in fair value of certain equity investments names, their proven ability to maintain market leadership and profitable previously designated as ‘available-for-sale’ being designated as fair value operations over long periods of time and the Group’s commitment to develop through other comprehensive income or fair value through profit or loss. and enhance their value. The carrying value of these intangible assets is Further details on reclassifications are set out in note 24. Movements in fair reviewed at least annually for impairment and adjusted to the recoverable value through profit or loss are recorded in the consolidated income amount if required. statement within revaluation of financial instruments. Amortisation is provided at rates calculated to write off the cost less estimated ACCRUED AND DEFERRED INCOME residual value of each asset on a straight-line basis over its estimated useful life Accrued income is a contract asset and is recognised when a performance as follows: obligation has been satisfied but has not yet been billed. Contract assets are – Brand names (with finite lives) – 10–20 years. transferred to receivables when the right to consideration is unconditional and – Customer-related intangibles – 3–10 years. billed per the terms of the contractual agreement. – Other proprietary tools – 3–10 years. – Other (including capitalised computer software) – 3–5 years. In certain cases, payments are received from customers prior to satisfaction of performance obligations and recognised as deferred income. These balances CONTINGENT CONSIDERATION are considered contract liabilities and are typically related to prepayments for Contingent consideration is accounted for in accordance with IFRS 3 Business third party expenses that are incurred shortly after billing. Combinations. Contingent consideration only applies to situations where TRADE RECEIVABLES AND WORK IN PROGRESS contingent payments are not dependent on future employment of vendors and any such payments are expensed when they relate to future employment. Trade receivables are stated net of provisions for bad and doubtful debts. The Group has adopted IFRS 9 Financial Instruments from 1 January 2018 which Future anticipated payments to vendors in respect of contingent requires an expected loss method of impairment of financial assets to be used. consideration (earnout agreements) are initially recorded at fair value which The implementation of this did not have a material impact on the Group. is the present value of the expected cash outflows of the obligations. The obligations are dependent on the future financial performance of the interests The Group has applied the simplified approach to measuring expected credit acquired (typically over a four- to five-year period following the year of losses, as permitted by IFRS 9. Therefore the Group does not track changes in acquisition) and assume the operating companies improve profits in line credit risk, but recognises a loss allowance based on the financial asset’s with Directors’ estimates. The Directors derive their estimates from internal lifetime expected credit loss. The Group measures expected credit losses business plans together with financial due diligence performed in based on the ageing of the receivable, based on the Group’s historical connection with the acquisition. experience and informed credit assessment. The Group considers a loss allowance to be required for 50% of all invoices aged 180 days to 1 year and Subsequent adjustments to the fair value are recorded in the consolidated 100% of all invoices aged over 1 year, with adjustments where there is specific income statement within revaluation of financial instruments. information to indicate that recoverability of the balance is likely. Further credit losses are recognised where the Group has information that indicates it PROPERTY, PLANT AND EQUIPMENT is unlikely to recover balances in full. Property, plant and equipment are shown at cost less accumulated depreciation and any provision for impairment with the exception of freehold Further details on provisions for bad and doubtful debts are provided in note 16. land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Work in progress includes outlays incurred on behalf of clients, including Where this indicates that an asset may be impaired, the Group applies the production costs, and other third-party costs that have not yet been billed requirements of IAS 36 Impairment of Assets in assessing the carrying amount and are considered receivables under IFRS 15 Revenue from Contracts of the asset. This process includes comparing its recoverable amount with its with Customers. WPP ANNUAL REPORT 2018 123

FINANCIAL STATEMENTS ACCOUNTING POLICIES FOREIGN CURRENCY AND INTEREST RATE HEDGING DEBT The Group’s policy on interest rate and foreign exchange rate management Interest-bearing debt is recorded at the proceeds received, net of direct sets out the instruments and methods available to hedge interest and currency issue costs. risk exposures and the control procedures in place to ensure effectiveness. BORROWING COSTS The Group uses derivative financial instruments to reduce exposure to foreign Finance costs of borrowing are recognised in the consolidated income exchange risk and interest rate movements. The Group does not hold or issue statement over the term of those borrowings. derivative financial instruments for speculative purposes. REVENUE RECOGNITION Derivatives are initially recognised at fair value at the date a derivative The Group is a leading worldwide creative transformation organisation offering contract is entered into and are subsequently remeasured to their fair value at national and multinational clients a comprehensive range of communications, each balance sheet date. The resulting gain or loss is recognised in profit or experience, commerce and technology services. Contracts often involve loss immediately unless the derivative is designated and effective as a hedging multiple agencies offering different services in different countries. As such, the instrument, in which event the timing of the recognition in profit or loss terms of local, regional and global contracts can vary to meet client needs and depends on the nature of the hedge relationship. regulatory requirements. Consistent with the industry, contracts are typically short-term in nature and tend to be cancellable by either party with 90 days At the inception of the hedge relationship the entity documents the notice. The Group is generally entitled to payment for work performed to date. relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge The Group is generally paid in arrears for its services. Invoices are typically transactions. Furthermore, at the inception of the hedge and on an ongoing payable within 30 to 60 days. Revenue comprises commissions and fees earned basis, the Group documents whether the hedging instrument that is used in in respect of amounts billed and is stated exclusive of VAT, sales taxes and trade a hedging relationship is highly effective in offsetting changes in fair values discounts. Pass-through costs comprise fees paid to external suppliers when or cash flows of the hedged item. they are engaged to perform part or all of a specific project and are charged directly to clients, predominantly media and data collection costs. Costs to Note 24 contains details of the fair values of the derivative instruments used for obtain a contract are typically expensed as incurred as the contracts are hedging purposes. generally short-term in nature. Changes in the fair value of derivatives that are designated and qualify as In most instances, promised services in a contract are not considered distinct or fair value hedges are recorded in profit or loss immediately, together with represent a series of services that are substantially the same with the same any changes in the fair value of the hedged item that is attributable to the pattern of transfer to the customer and, as such, are accounted for as a single hedged risk. performance obligation. However, where there are contracts with services that are capable of being distinct, are distinct within the context of the contract, and The effective portion of changes in the fair value of derivatives that are are accounted for as separate performance obligations, revenue is allocated to designated and qualify as cash flow or net investment hedges is recognised in each of the performance obligations based on relative standalone selling prices. other comprehensive income and deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts Revenue is recognised when a performance obligation is satisfied, in deferred in equity are recycled in profit or loss in the periods when the accordance with the terms of the contractual arrangement. Typically hedged item is recognised in profit or loss. However, when the forecast performance obligations are satisfied over time as services are rendered. transaction that is hedged results in the recognition of a non-financial asset or Revenue recognised over time is based on the proportion of the level of service a non-financial liability, the gains and losses previously deferred in equity are performed. Either an input method or an output method, depending on the transferred from equity and included in the initial measurement of the cost of particular arrangement, is used to measure progress for each performance the asset or liability. obligation. For most fee arrangements, costs incurred are used as an objective input measure of performance. The primary input of substantially all work Hedge accounting is discontinued when the hedging instrument expires or is performed under these arrangements is labour. There is normally a direct sold, terminated, or exercised, or no longer qualifies for hedge accounting. At relationship between costs incurred and the proportion of the contract that time, any cumulative gain or loss on the hedging instrument recognised in performed to date. In other circumstances relevant output measures, such as equity is retained in equity until the forecast transaction occurs. If a hedged the achievement of any project milestones stipulated in the contract, are used transaction is no longer expected to occur, the net cumulative gain or loss to assess proportional performance. recognised in equity is transferred to net profit or loss for the period. For our retainer arrangements, we have a stand ready obligation to perform Derivatives embedded in other financial instruments or other host contracts services on an ongoing basis over the life of the contract. The scope of these are treated as separate derivatives when their risks and characteristics are not arrangements are broad and generally are not reconcilable to another input or closely related to those of host contracts and the host contracts are not output criteria. In these instances, revenue is recognised using a time-based carried at fair value with unrealised gains or losses reported in the method resulting in straight-line revenue recognition. consolidated income statement. The amount of revenue recognised depends on whether we act as an agent or LIABILITIES IN RESPECT OF OPTION AGREEMENTS as a principal. Certain arrangements with our clients are such that our Option agreements that allow the Group’s equity partners to require the responsibility is to arrange for a third party to provide a specified good or Group to purchase a non-controlling interest are treated as derivatives over service to the client. In these cases we are acting as an agent as we do not equity instruments and are recorded in the consolidated balance sheet initially control the relevant good or service before it is transferred to the client. When at the present value of the redemption amount in accordance with IAS 32 we act as an agent, the revenue recorded is the net amount retained. Costs Financial Instruments: Presentation and subsequently measured at fair value in incurred with external suppliers (such as production costs and media suppliers) accordance with IFRS 9 Financial Instruments. The movement in the fair value are excluded from revenue and recorded as work in progress until billed. is recognised as income or expense within revaluation of financial instruments in the consolidated income statement. The Group acts as principal when we control the specified good or service prior to transfer. When the Group acts as a principal (such as in-house production DERECOGNITION OF FINANCIAL LIABILITIES services, events, data investment management and branding), the revenue In accordance with IFRS 9 Financial Instruments, a financial liability of the recorded is the gross amount billed. Billings related to out-of-pocket costs such Group is only released to the consolidated income statement when the as travel are also recognised at the gross amount billed with a corresponding underlying legal obligation is extinguished. amount recorded as an expense. 124 WPP ANNUAL REPORT 2018

ACCOUNTING POLICIES FINANCIAL STATEMENTS Further details on revenue recognition are detailed by sector below: is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted ADVERTISING AND MEDIA INVESTMENT MANAGEMENT by IAS 12 Income Taxes. Deferred tax is charged or credited in the consolidated Revenue is typically derived from media placements and advertising services. income statement, except when it relates to items charged or credited to other Revenue may consist of various arrangements involving commissions, fees, comprehensive income or directly to equity, in which case the deferred tax is incentive-based revenue or a combination of the three, as agreed upon with also dealt with in other comprehensive income or equity. Deferred tax assets are each client. Revenue for commissions on purchased media is typically recognised to the extent that it is probable that taxable profits will be available recognised at the point in time the media is run. against which deductible temporary differences can be utilised, which can require the use of accounting estimation and the exercise of judgement. Such The Group receives volume rebates from certain suppliers for transactions assets and liabilities are not recognised if the temporary difference arises from entered into on behalf of clients that, based on the terms of the relevant the initial recognition of goodwill or other assets and liabilities (other than in a contracts and local law, are either remitted to clients or retained by the Group. business combination) in a transaction that affects neither the taxable profit nor If amounts are passed on to clients they are recorded as liabilities until settled the accounting profit. or, if retained by the Group, are recorded as revenue when earned. The carrying amount of deferred tax assets is reviewed at each balance sheet Variable incentive-based revenue typically comprises both quantitative and date and reduced to the extent that it is no longer probable that sufficient qualitative elements. Incentive compensation is estimated using the most taxable profits will be available to allow all or part of the asset to be recovered. likely amount and is included in revenue up to the amount that is highly probable not to result in a significant reversal of cumulative revenue Deferred tax liabilities are recognised for taxable temporary differences arising recognised. The Group recognises incentive revenue as the related on investments in subsidiaries and associates, and interests in joint ventures, performance obligation is satisfied. except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse DATA INVESTMENT MANAGEMENT in the foreseeable future. Revenue for market research services is typically recognised over time based on input measures. For certain performance obligations, output measures such Deferred tax assets and liabilities are offset when there is a legally enforceable as the percentage of interviews completed, percentage of reports delivered right to set off current tax assets against current tax liabilities and when they to a client and the achievement of any project milestones stipulated in the relate to income taxes levied by the same taxation authority and the Group contract are used to measure progress. intends to settle its current tax assets and liabilities on a net basis. While most of the studies provided in connection with the Group’s market Deferred tax is calculated at the tax rates that are expected to apply in the research contracts are undertaken in response to an individual client’s or period when the liability is settled or the asset is realised based on enacted group of clients’ specifications, in certain instances a study may be developed or substantively enacted legislation. as an off-the-shelf product offering sold to a broad client base. For these RETIREMENT BENEFIT COSTS transactions, revenue is recognised when the product is delivered. When the terms of the transaction provide for licensing the right to access a product on The Group accounts for retirement benefit costs in accordance with IAS 19 a subscription basis, revenue is recognised over the subscription period, Employee Benefits. typically on a straight-line basis. For defined contribution plans, contributions are charged to the consolidated PUBLIC RELATIONS & PUBLIC AFFAIRS AND BRAND CONSULTING, income statement as payable in respect of the accounting period. HEALTH & WELLNESS AND SPECIALIST COMMUNICATIONS Revenue for these services is typically derived from retainer fees and fees for For defined benefit plans the amounts charged to operating profit are the services to be performed subject to specific agreement. Most revenue under current service costs, past service costs, administrative expenses and gains these arrangements is earned over time, in accordance with the terms of the and losses on settlements and curtailments. They are included as part of staff contractual arrangement. costs. Past service costs are recognised immediately in the consolidated income statement when the related plan amendment occurs. Net interest TAXATION expense is calculated by applying the discount rate to the recognised overall Corporate taxes are payable on taxable profits at current rates. The tax expense surplus or deficit in the plan. represents the sum of the tax currently payable and deferred tax. Actuarial gains and losses are recognised immediately in the consolidated The Group is subject to corporate taxes in a number of different jurisdictions and statement of comprehensive income. judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such circumstances, the Where defined benefit plans are funded, the assets of the plan are held Group recognises liabilities for anticipated taxes based on the best information separately from those of the Group, in separate independently managed available and where the anticipated liability is both probable and estimable, funds. Pension plan assets are measured at fair value and liabilities are liabilities are classified as current. Any interest and penalties accrued are measured on an actuarial basis using the projected unit method and included in corporate income taxes both in the consolidated income statement discounted at a rate equivalent to the current rate of return on a high-quality and balance sheet. Where the final outcome of such matters differs from the corporate bond of equivalent currency and term to the plan liabilities. The amount recorded, any differences may impact the income tax and deferred tax actuarial valuations are obtained at least triennially and are updated at each provisions in the period in which the final determination is made. balance sheet date. The tax laws that apply to the Group’s subsidiaries may be amended by the Recognition of a surplus in a defined benefit plan is limited based on the relevant tax authorities. Such potential amendments are regularly monitored economic gain the Company is expected to benefit from in the future by and adjustments are made to the Group’s tax liabilities and deferred tax assets means of a refund or reduction in future contributions to the plan, in and liabilities where necessary. accordance with IAS 19. The tax currently payable is based on taxable profit for the year. Taxable profit PROVISIONS FOR LIABILITIES AND CHARGES differs from net profit as reported in the consolidated income statement Provisions comprise liabilities where there is uncertainty about the timing of because it excludes items of income or expense that are taxable or deductible in settlement, but where a reliable estimate can be made of the amount. These other years and it further excludes items that are never taxable or deductible. include provisions for vacant space, sub-let losses and other property-related The Group’s liability for current tax is calculated using tax rates that have been liabilities. Also included are other provisions, such as certain long-term enacted or substantively enacted by the balance sheet date. employee benefits and legal claims, where the likelihood of settlement is considered probable. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and WPP ANNUAL REPORT 2018 125

FINANCIAL STATEMENTS ACCOUNTING POLICIES FINANCE LEASES Assets held under finance leases are recognised as assets of the Group at the inception of the lease at the lower of their fair value and the present value of the minimum lease payments. Depreciation on leased assets is charged to the consolidated income statement on the same basis as owned assets. Leasing payments are treated as consisting of capital and interest elements and the interest is charged to the consolidated income statement as it is incurred. OPERATING LEASES Operating lease rentals are charged to the consolidated income statement on a straight-line basis over the lease term. Any premium or discount on the acquisition of a lease is spread over the life of the lease on a straight-line basis. TRANSLATION OF FOREIGN CURRENCIES Foreign currency transactions arising from normal trading activities are recorded at the rates in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year-end are translated at the year-end exchange rate. Foreign currency gains and losses are credited or charged to the consolidated income statement as they arise. The income statements of overseas subsidiary undertakings are translated into pounds sterling at average exchange rates and the year-end net assets of these companies are translated at year-end exchange rates. Exchange differences arising from retranslation of the opening net assets and on foreign currency borrowings (to the extent that they hedge the Group’s investment in such operations) are reported in the consolidated statement of comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. HYPERINFLATION IN ARGENTINA During 2018, Argentina was designated as a hyperinflationary economy and the financial statements of the Group’s subsidiaries in Argentina have been adjusted for the effects of inflation in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies. IAS 29 requires that the income statement is adjusted for inflation in the period and translated at the year-end foreign exchange rate and that non-monetary assets and liabilities on the balance sheet are restated to reflect the change in purchasing power caused by inflation from the date of initial recognition. This resulted in an increase in goodwill of £105.8 million and an increase in other intangibles of £19.5 million. The impact on other non-monetary assets and liabilities and the impact on the Group’s income statement in the year were immaterial. SHARE-BASED PAYMENTS The Group issues equity-settled share-based payments (including share options) to certain employees and accounts for these awards in accordance with IFRS 2 Share-Based Payment. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the fair value of equity settled share-based transactions are set out in notes 21 and 25. The fair value determined at the grant date is recognised in the consolidated income statement as an expense on a straight-line basis over the relevant vesting period, based on the Group’s estimate of the number of shares that will ultimately vest and adjusted for the effect of non-market-based vesting conditions. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY IN APPLYING ACCOUNTING POLICIES Management is required to make key decisions and judgements whilst acknowledging there is estimation uncertainty in the process of applying the Group’s accounting policies. These estimates and judgements are reviewed on an ongoing basis. Where judgement has been applied or estimation uncertainty exists, the key factors taken into consideration are disclosed in the accounting policies and the appropriate note in these financial statements. The most significant areas of estimation uncertainty include: – Goodwill: The discounted cash flow methodology employed by the Group when testing for goodwill impairment requires estimates regarding revenue growth, operating margins, discount rates and working capital requirements. Further details of the methodology, discount rates, long-term growth rates and estimates used in relation to the goodwill impairment on VMLY&R in 2018 are set out in note 12. – Payments due to vendors (earnout agreements) and liabilities in respect of put options: Estimates are required regarding growth rates in deriving future financial performance and discount rates to be applied when measuring the liabilities for earnouts and put options. Further details on growth rates and discount rates and the sensitivity to these estimates are set out in note 24. – Provision for post-employment benefits: Estimates are required in the accounting for defined benefit pension plans, including establishing discount rates, rates of increase in salaries and pensions in payment, inflation and mortality assumptions. These estimates are made by management based on the advice of qualified advisors. Details of the assumptions used and the sensitivity of the benefit obligation to these assumptions are set out in note 22. The most significant areas of judgements include: – Revenue recognition: Judgement is required regarding the timing of recognition, particularly in relation to media volume income with regards to whether it is required to be passed back to the client and in assessing progress on performance obligations where revenue is recognised over time, particularly in the Group’s Data Investment Management business. Further details are set out in the accounting policy. – Taxation: Judgement is required in relation to the level of provisions required and the amount of taxes that will be due, particularly given the many countries in which the Group operates. Where the final tax outcome is different from the amounts recorded then such differences may expose the Group to additional tax liabilities or impact the carrying value of deferred tax assets, which would affect the future tax charge. Further details are set out in note 7. DIRECTORS’ RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: – the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and – the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. Mark Read Paul Richardson Chief Executive Officer Group Finance Director 10 April 2019 126 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 2018 20172 20162 20183 20172,3 20162,3 Notes £m £m £m $m $m $m Billings1 55,798.3 55,585.4 55,278.0 74,352.7 71,753.8 74,484.0 Revenue 2 15,602.4 15,804.2 14,887.3 20,795.4 20,399.7 20,053.6 Costs of services 3 (12,663.5) (12,629.0) (11,846.5) (16,902.5) (16,278.1) (15,997.3) Gross pro?t 2,938.9 3,175.2 3,040.8 3,892.9 4,121.6 4,056.3 General and administrative costs 3 (1,507.5) (1,267.0) (977.7) (1,979.6) (1,634.7) (1,355.2) Operating pro?t 1,431.4 1,908.2 2,063.1 1,913.3 2,486.9 2,701.1 Share of results of associates 4 43.5 113.5 49.8 56.4 147.4 65.3 Pro?t before interest and taxation 1,474.9 2,021.7 2,112.9 1,969.7 2,634.3 2,766.4 Finance income 6 104.8 95.2 80.4 141.0 122.8 109.6 Finance costs 6 (289.3) (269.8) (254.5) (386.9) (347.6) (344.1) Revaluation of ?nancial instruments 6 172.9 262.2 (48.3) 224.4 346.4 (71.4) Pro?t before taxation 1,463.3 2,109.3 1,890.5 1,948.2 2,755.9 2,460.5 Taxation 7 (323.9) (197.0) (388.9) (427.9) (249.1) (516.7) Pro?t for the year 1,139.4 1,912.3 1,501.6 1,520.3 2,506.8 1,943.8 Attributable to: Equity holders of the parent 1,062.9 1,816.6 1,400.1 1,418.7 2,382.4 1,808.7 Non-controlling interests 76.5 95.7 101.5 101.6 124.4 135.1 1,139.4 1,912.3 1,501.6 1,520.3 2,506.8 1,943.8 Revenue less pass-through costs 2, 29 12,826.6 13,169.6 12,428.6 17,094.9 16,997.0 16,731.7 Headline PBIT 29 2,047.3 2,267.1 2,160.3 2,701.5 2,953.4 2,864.6 Headline PBIT margin4 2, 29 16.0% 17.2% 17.4% 15.8% 17.4% 17.1% Headline PBT 29 1,862.8 2,092.5 1,986.2 2,455.6 2,728.6 2,630.1 Earnings per share Basic earnings per ordinary share 9 85.2p 144.0p 109.6p 113.7¢ 188.9¢ 141.5¢ Diluted earnings per ordinary share 9 84.3p 142.4p 108.0p 112.5¢ 186.7¢ 139.6¢ Notes The accompanying notes form an integral part of this consolidated income statement. 1 Billings is de?ned on page 178. 2 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. 3 The consolidated income statement above is also expressed in US dollars for information purposes only and is unaudited. It has been prepared assuming the US dollar is the reporting currency of the Group, whereby local currency results are translated into US dollars at actual monthly average exchange rates in the period presented. Among other currencies, this includes an average exchange rate of US$1.3351 to the pound sterling for the year 2018 (2017: US$1.2887, 2016: US$1.3547). 4 Previously referred to as revenue less pass-through costs margin. WPP ANNUAL REPORT 2018 127

FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 2018 2017 2016 £m £m £m Pro?t for the year 1,139.4 1,912.3 1,501.6 Items that may be reclassi?ed subsequently to pro?t or loss: Exchange adjustments on foreign currency net investments 78.9 (465.2) 1,378.0 Gain/(loss) on revaluation of available for sale investments – 32.1 (93.1) 78.9 (433.1) 1,284.9 Items that will not be reclassi?ed subsequently to pro?t or loss: Actuarial gain/(loss) on de?ned bene?t pension plans 8.9 17.0 (15.9) Deferred tax on de?ned bene?t pension plans (0.7) (24.6) (0.4) Movements on equity investments held at fair value through other comprehensive income (247.9) – –(239.7) (7.6) (16.3) Other comprehensive (loss)/income for the year (160.8) (440.7) 1,268.6 Total comprehensive income for the year 978.6 1,471.6 2,770.2 Attributable to: Equity holders of the parent 893.1 1,395.6 2,600.6 Non-controlling interests 85.5 76.0 169.6 978.6 1,471.6 2,770.2 Note The accompanying notes form an integral part of this consolidated statement of comprehensive income. 128 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 2018 2017 2016 Notes £m £m £m Net cash in?ow from operating activities 11 1,693.8 1,408.1 1,773.8 Investing activities Acquisitions 11 (298.8) (477.5) (719.3) Proceeds on disposal of investments and subsidiaries 11 849.0 296.0 80.5 Purchases of property, plant and equipment (314.8) (288.9) (252.1) Purchases of other intangible assets (including capitalised computer software) (60.4) (37.3) (33.0) Proceeds on disposal of property, plant and equipment 9.5 8.0 7.7 Net cash in?ow/(out?ow) from investing activities 184.5 (499.7) (916.2) Financing activities Share option proceeds 1.2 6.4 27.2 Cash consideration for non-controlling interests 11 (109.9) (47.3) (58.3) Share repurchases and buy-backs 11 (207.1) (504.2) (427.4) Net (decrease)/increase in borrowings 11 (440.6) 599.6 (22.5) Financing and share issue costs (3.8) (0.8) (6.4) Equity dividends paid (747.4) (751.5) (616.5) Dividends paid to non-controlling interests in subsidiary undertakings (106.2) (87.8) (89.6) Net cash out?ow from ?nancing activities (1,613.8) (785.6) (1,193.5) Net increase/(decrease) in cash and cash equivalents 264.5 122.8 (335.9) Translation of cash and cash equivalents (61.5) (27.2) 291.9 Cash and cash equivalents at beginning of year 1,998.2 1,902.6 1,946.6 Cash and cash equivalents at end of year 11 2,201.2 1,998.2 1,902.6 Reconciliation of net cash ?ow to movement in net debt: Net increase/(decrease) in cash and cash equivalents 264.5 122.8 (335.9) Cash out?ow/(in?ow) from decrease/(increase) in debt ?nancing 444.4 (598.8) 28.9 Debt acquired – – (144.4) Other movements (1.4) (1.9) (2.3) Translation differences (241.1) 125.3 (466.0) Movement of net debt in the year 466.4 (352.6) (919.7) Net debt at beginning of year (4,483.1) (4,130.5) (3,210.8) Net debt at end of year 10 (4,016.7) (4,483.1) (4,130.5) Note The accompanying notes form an integral part of this consolidated cash ?ow statement. WPP ANNUAL REPORT 2018 129

FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2018 2018 2017 Notes £m £m1 Non-current assets Intangible assets: Goodwill 12 13,202.8 12,952.9 Other 12 1,842.0 2,018.4 Property, plant and equipment 13 1,083.0 979.5 Interests in associates and joint ventures 14 796.8 1,065.2 Other investments 14 666.7 1,153.5 Deferred tax assets 15 153.0 160.3 Trade and other receivables 16 180.0 176.2 17,924.3 18,506.0 Current assets Corporate income tax recoverable 198.7 234.7 Trade and other receivables 16 13,101.5 12,530.7 Cash and short-term deposits 2,643.2 2,391.4 15,943.4 15,156.8 Current liabilities Trade and other payables 17 (15,038.4) (14,241.1) Corporate income tax payable (545.9) (649.3) Bank overdrafts, bonds and bank loans 19 (1,025.1) (624.1) (16,609.4) (15,514.5) Net current liabilities (666.0) (357.7) Total assets less current liabilities 17,258.3 18,148.3 Non-current liabilities Bonds and bank loans 19 (5,634.8) (6,250.4) Trade and other payables 18 (841.4) (992.8) Deferred tax liabilities 15 (479.5) (513.7) Provision for post-employment bene?ts 22 (184.3) (206.3) Provisions for liabilities and charges 20 (311.7) (229.0) (7,451.7) (8,192.2) Net assets 9,806.6 9,956.1 Equity Called-up share capital 25 133.3 133.3 Share premium account 569.7 568.5 Other reserves 26 393.5 761.7 Own shares (1,255.7) (1,171.1) Retained earnings 9,541.4 9,194.9 Equity shareholders’ funds 9,382.2 9,487.3 Non-controlling interests 424.4 468.8 Total equity 9,806.6 9,956.1 Notes The accompanying notes form an integral part of this consolidated balance sheet. 1 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. The financial statements were approved by the Board of Directors and authorised for issue on 10 April 2019. Signed on behalf of the Board: Mark Read Paul Richardson Chief Executive Officer Group Finance Director 130 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Total Called-up Share equity share Non- share premium Other Own Retained owners’ controlling capital account reserves1 shares earnings2 funds interests Total £m £m £m £m £m £m £m £m Restated balance at 1 January 2017 133.2 562.2 1,185.2 (962.0) 8,400.0 9,318.6 443.1 9,761.7 Ordinary shares issued 0.1 6.3 – – – 6.4 – 6.4 Treasury share additions – – – (289.6) – (289.6) – (289.6) Treasury share allocations – – – 112.2 (112.2) – – –Profit for the year – – – – 1,816.6 1,816.6 95.7 1,912.3 Exchange adjustments on foreign currency net investments – – (445.5) – – (445.5) (19.7) (465.2) Gain on revaluation of available for sale investments – – 32.1 – – 32.1 – 32.1 Actuarial gain on defined benefit pension plans – – – – 17.0 17.0 – 17.0 Deferred tax on defined benefit pension plans – – – – (24.6) (24.6) – (24.6) Other comprehensive loss – – (413.4) – (7.6) (421.0) (19.7) (440.7) Dividends paid – – – – (751.5) (751.5) (87.8) (839.3) Non-cash share-based incentive plans (including share options) – – – – 105.0 105.0 – 105.0 Tax adjustment on share-based payments – – – – 3.0 3.0 – 3.0 Net movement in own shares held by ESOP Trusts – – – (31.7) (182.9) (214.6) – (214.6) Recognition/remeasurement of financial instruments – – (10.1) – (11.7) (21.8) – (21.8) Acquisition of subsidiaries3 – – – – (63.8) (63.8) 37.5 (26.3) Balance at 31 December 2017 133.3 568.5 761.7 (1,171.1) 9,194.9 9,487.3 468.8 9,956.1 Accounting policy change (IFRS 9)4 – – (407.4) – 407.4 – – – Revised balance at 1 January 2018 133.3 568.5 354.3 (1,171.1) 9,602.3 9,487.3 468.8 9,956.1 Ordinary shares issued – 1.2 – – – 1.2 – 1.2 Treasury share additions – – – (104.3) – (104.3) – (104.3) Treasury share allocations – – – 1.5 (1.5) – – –Profit for the year – – – – 1,062.9 1,062.9 76.5 1,139.4 Exchange adjustments on foreign currency net investments – – 69.9 – – 69.9 9.0 78.9 other Movements comprehensive on equity income investments held at fair value through – – – – (247.9) (247.9) – (247.9) Actuarial gain on defined benefit pension plans – – – – 8.9 8.9 – 8.9 Deferred tax on defined benefit pension plans – – – – (0.7) (0.7) – (0.7) Other comprehensive income/(loss) – – 69.9 – (239.7) (169.8) 9.0 (160.8) Dividends paid – – – – (747.4) (747.4) (106.2) (853.6) Non-cash share-based incentive plans (including share options) – – – – 84.8 84.8 – 84.8 Tax adjustment on share-based payments – – – – (1.2) (1.2) – (1.2) Net movement in own shares held by ESOP Trusts – – – 18.2 (121.0) (102.8) – (102.8) Recognition/remeasurement of financial instruments – – (30.7) – 10.3 (20.4) – (20.4) Acquisition of subsidiaries3 – – – – (108.1) (108.1) (23.7) (131.8) Balance at 31 December 2018 133.3 569.7 393.5 (1,255.7) 9,541.4 9,382.2 424.4 9,806.6 Notes The accompanying notes form an integral part of this consolidated statement of changes in equity. 1 Other reserves are analysed in note 26. 2 Retained earnings have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. 3 Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition of non-controlling interests on new acquisitions. 4 The impact of the adoption of IFRS 9 Financial Instruments from 1 January 2018 is described in the accounting policies. WPP ANNUAL REPORT 2018 131

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 1. GENERAL INFORMATION WPP plc is a company incorporated in Jersey. The address of the registered office is Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES and the address of the principal executive office is Sea Containers, 18 Upper Ground, London, United Kingdom, SE1 9GL. The nature of the Group’s operations and its principal activities are set out in note 2. These consolidated financial statements are presented in pounds sterling. 2. SEGMENT INFORMATION The Group is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Substantially all of the Group’s revenue is from contracts with customers. The Group is organised into four reportable segments – Advertising and Media Investment Management; Data Investment Management; Public Relations & Public Affairs; and Brand Consulting, Health & Wellness and Specialist Communications. This last reportable segment includes direct, interactive and ecommerce. IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Chief Executive Officer. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits the aggregation of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the Directors have had regard to the similar economic characteristics of certain operating segments, their shared client base, the similar nature of their products or services and their long-term margins, amongst other factors. Reportable segments Reported contributions were as follows: Revenue less pass-through Headline Headline Revenue1,2 costs2,3 PBIT4 PBIT Income statement £m £m £m margin2,3 2018 Advertising and Media Investment Management 7,132.4 5,529.7 972.4 17.6% Data Investment Management 2,582.5 1,965.4 301.1 15.3% Public Relations & Public Affairs 1,210.7 1,136.3 183.7 16.2% Brand Consulting, Health & Wellness and Specialist Communications 4,676.8 4,195.2 590.1 14.1% 15,602.4 12,826.6 2,047.3 16.0% 2017 Advertising and Media Investment Management 7,368.7 5,889.3 1,109.0 18.8% Data Investment Management 2,703.4 2,052.1 350.3 17.1% Public Relations & Public Affairs 1,204.0 1,140.6 183.2 16.1% Brand Consulting, Health & Wellness and Specialist Communications 4,528.1 4,087.6 624.6 15.3% 15,804.2 13,169.6 2,267.1 17.2% 2016 Advertising and Media Investment Management 6,709.4 5,450.9 1,027.2 18.8% Data Investment Management 2,672.4 1,994.0 351.5 17.6% Public Relations & Public Affairs 1,130.6 1,078.5 179.8 16.7% Brand Consulting, Health & Wellness and Specialist Communications 4,374.9 3,905.2 601.8 15.4% 14,887.3 12,428.6 2,160.3 17.4% Notes 1 Intersegment sales have not been separately disclosed as they are not material. 2 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. 3 Revenue less pass-through costs and headline PBIT margin are de?ned in note 29. Headline PBIT margin was previously referred to as revenue less pass-through costs margin. 4 A reconciliation from reported pro?t before interest and taxation to headline PBIT is provided in note 29. Reported pro?t before interest and taxation is reconciled to reported pro?t before taxation in the consolidated income statement. 132 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Depreciation Share of Interests in Share-based Capital and Goodwill results of associates and payments additions1 amortisation2 impairment associates joint ventures Other information £m £m £m £m £m £m 2018 Advertising and Media Investment Management 41.9 190.8 111.8 148.0 16.6 203.4 Data Investment Management 12.8 68.9 56.6 0.9 12.5 113.1 Public Relations & Public Affairs 8.3 13.4 13.8 – 5.2 39.5 Brand Consulting, Health & Wellness and Specialist Communications 21.8 102.1 81.6 35.0 9.2 440.8 84.8 375.2 263.8 183.9 43.5 796.8 2017 Advertising and Media Investment Management 57.0 171.3 108.8 19.5 27.0 193.1 Data Investment Management 14.4 58.8 59.9 – 15.3 106.3 Public Relations & Public Affairs 8.6 10.6 12.2 7.6 6.3 34.2 Brand Consulting, Health & Wellness and Specialist Communications 25.0 85.5 86.1 – 64.9 731.6 105.0 326.2 267.0 27.1 113.5 1,065.2 2016 Advertising and Media Investment Management 60.7 126.2 105.4 20.9 8.3 285.6 Data Investment Management 13.0 61.5 60.9 – 13.2 109.4 Public Relations & Public Affairs 7.5 10.3 11.6 – 3.2 108.1 Brand Consulting, Health & Wellness and Specialist Communications 25.3 87.1 81.5 6.1 25.1 566.3 106.5 285.1 259.4 27.0 49.8 1,069.4 Notes 1 Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software). 2 Depreciation of property, plant and equipment and amortisation of other intangible assets. WPP ANNUAL REPORT 2018 133

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Contributions by geographical area were as follows: 2018 20172 20162 £m £m £m Revenue1 North America3 5,371.0 5,659.2 5,400.9 UK 2,189.4 2,133.4 1,970.7 Western Continental Europe 3,335.3 3,230.6 3,008.5 Africa Asia Paci?c, & Middle Latin East America, and Central & Eastern Europe 4,706.7 4,781.0 4,507.2 15,602.4 15,804.2 14,887.3 Revenue less pass-through costs4 North America3 4,474.2 4,793.9 4,598.4 UK 1,691.3 1,688.0 1,590.2 Western Continental Europe 2,735.4 2,630.6 2,438.3 Africa Asia Paci?c, & Middle Latin East America, and Central & Eastern Europe 3,925.7 4,057.1 3,801.7 12,826.6 13,169.6 12,428.6 Headline PBIT4 North America3 804.0 937.4 895.4 UK 244.6 280.0 261.4 Western Continental Europe 372.7 376.0 351.7 Africa Asia Paci?c, & Middle Latin East America, and Central & Eastern Europe 626.0 673.7 651.8 2,047.3 2,267.1 2,160.3 Margin Margin2 Margin2 Headline PBIT margin4 North America 18.0% 19.6% 19.5% UK 14.5% 16.6% 16.4% Western Continental Europe 13.6% 14.3% 14.4% Africa Asia Paci?c, & Middle Latin East America, and Central & Eastern Europe 15.9% 16.6% 17.1% 16.0% 17.2% 17.4% Notes 1 Intersegment sales have not been separately disclosed as they are not material. 2 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. 3 North America includes the US with revenue of £5,074.1 million (2017: £5,336.3 million, 2016: £5,107.2 million), revenue less pass-through costs of £4,236.7 million (2017: £4,535.3 million, 2016: £4,359.7 million) and headline PBIT of £761.6 million (2017: £890.3 million, 2016: £849.4 million). 4 Revenue less pass-through costs, headline PBIT and headline PBIT margin are de?ned in note 29. Headline PBIT margin was previously referred to as revenue less pass-through costs margin. 2018 2017 £m £m Non-current assets1 North America2 7,269.7 7,667.5 UK 2,079.2 2,098.2 Western Continental Europe 4,385.6 4,542.1 Middle Asia Paci?c, East and Latin Central America, & Eastern Africa & Europe 4,028.4 4,035.8 17,762.9 18,343.6 Notes 1 Non-current assets excluding ?nancial instruments and deferred tax. 2 North America includes the US with non-current assets of £6,791.9 million (2017: £7,202.7 million). 3. COSTS OF SERVICES AND GENERAL AND ADMINISTRATIVE COSTS 2018 20171 20161 £m £m £m Costs of services 12,663.5 12,629.0 11,846.5 General and administrative costs 1,507.5 1,267.0 977.7 14,171.0 13,896.0 12,824.2 Costs of services and general and administrative costs include: 2018 20171 20161 £m £m £m Staff costs (note 5) 8,172.6 8,319.0 7,784.9 Establishment costs 871.7 888.6 836.5 Media pass-through costs 1,458.0 1,429.4 1,276.2 Data collection pass-through costs 609.2 646.4 669.8 Other costs of services and general and administrative costs2 3,059.5 2,612.6 2,256.8 14,171.0 13,896.0 12,824.2 Other costs of services and general and administrative costs include: Goodwill impairment (note 12) 183.9 27.1 27.0 Investment write-downs 2.0 95.9 86.1 Restructuring and transformation costs 302.3 56.8 27.4 Amortisation intangible assets and (note impairment 12) of acquired 280.0 195.1 168.4 Amortisation 12) of other intangible assets (note 38.7 36.3 38.6 Depreciation and equipment of property, plant 225.1 230.7 215.2 Losses and equipment on sale of property, plant 0.6 1.1 0.8 Gains and subsidiaries on disposal of investments (235.5) (129.0) (44.3) interests (Gains)/losses arising on from remeasurement a change in scope of equity of ownership (2.0) 0.3 (232.4) Net foreign exchange (gains)/losses (13.2) 12.9 (17.0) Notes 1 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. 2 Other costs of services and general and administrative costs include £708.6 million (2017: £558.8 million, 2016: £512.7 million) of other pass-through costs. In 2018, operating profit includes credits totalling £29.9 million (2017: £44.8 million, 2016: £26.3 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2017. Further details of the Group’s approach to acquisition reserves, as required by IFRS 3 Business Combinations, are given in note 27. The goodwill impairment charge of £183.9 million (2017: £27.1 million, 2016: £27.0 million) primarily relates to a charge of £148.0 million on VMLY&R, with the remaining £35.9 million relating to a number of under-performing businesses in the Group. In certain markets, the impact of current, local economic conditions and trading circumstances on these businesses is sufficiently severe to indicate impairment to the carrying value of goodwill. Investment write-downs of £95.9 million in 2017 (2016: £86.1 million) include £53.1 million in relation to comScore Inc, which had not released any financial statements in relation to its 2015, 2016 or 2017 results due to an internal investigation by their Audit Committee. In 2017, the market value of comScore Inc fell below the Group’s carrying value. Other investment write-downs relate to certain non-core minority investments in the US where forecast financial performance and/or liquidity issues indicate a permanent decline in the recoverability of the Group’s investment. In 2018, restructuring and transformation costs of £302.3 million comprise £210.3 million of restructuring costs and £92.0 million transformation costs with respect to strategic initiatives such as co-locations in major cities, IT transformation and shared services. In the fourth quarter of 2018, £234.0 million of restructuring and transformation costs were incurred in relation to the strategic review of the Group’s operations, as outlined in the investor day on 11 December 2018. As part of that review, restructuring actions have been taken to right-size underperforming businesses, address high cost severance markets 134 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS and simplify operational structures. Further restructuring and transformation costs will be incurred in 2019, 2020 and 2021. The remaining £68.3 million primarily relates to restructuring costs recorded in the first half and transformation costs in relation to the continuing global IT transformation programme. In 2017, restructuring and transformation costs of £56.8 million (2016: £27.4 million) predominantly comprise £33.7 million (2016: £nil) of severance costs arising from a structural assessment of certain of the Group’s operations, primarily in the mature markets; and £12.8 million (2016: £27.4 million) of costs resulting from the project to transform and rationalise the Group’s IT services and infrastructure including costs relating to the cyber attack in June 2017. Gains on disposal of investments and subsidiaries of £235.5 million in 2018 (2017: £129.0 million, 2016: £44.3 million) include £185.3 million gains on the disposal of the Group’s interest in Globant S.A. Gains in 2017 include £92.3 million on the sale of the Group’s equity interest in Asatsu-DK Inc following its acquisition by Bain Capital. In 2016, gains on remeasurement of equity interests arising from a change in scope of ownership of £232.4 million primarily comprise gains in relation to the reclassification of the Group’s interest in the Imagina Group in Spain from other investments to interests in associates, resulting from WPP attaining significant influence in the period. Auditors’ remuneration: 2018 2017 2016 £m £m £m audit Fees payable of the Company’s to the Company’s annual accounts auditors for the 1.4 1.4 1.4 The legislation audit of the Company’s subsidiaries pursuant to 21.7 20.7 19.4 Other services pursuant to legislation 4.2 4.0 3.7 Fees legislation payable to the auditors pursuant to 27.3 26.1 24.5 Tax advisory services – 0.1 1.6 Tax compliance services 0.1 0.1 1.3 Corporate ?nance services – – 0.1 Other services1 4.7 4.6 5.7 Total non-audit fees 4.8 4.8 8.7 Total fees 32.1 30.9 33.2 Note 1 Other services include audits for earnout purposes. 2018 2017 2016 £m £m £m Operating lease rentals: Land and buildings 585.3 586.6 556.1 Sublease income (25.4) (17.9) (11.6) 559.9 568.7 544.5 Plant and machinery 10.6 11.9 10.6 570.5 580.6 555.1 MINIMUM COMMITTED ANNUAL RENTALS Amounts payable in 2019 under leases will be as follows: Plant and machinery Land and buildings 2019 2018 2017 2019 2018 2017 £m £m £m £m £m £m In respect of operating leases which expire: – within one year 3.6 5.1 4.0 70.2 88.6 85.1 – within two to five years 19.2 10.8 10.5 272.7 236.2 287.9 – after five years 0.4 0.1 – 246.3 207.8 187.0 23.2 16.0 14.5 589.2 532.6 560.0 Future minimum annual amounts payable under all lease commitments in existence at 31 December 2018 are as follows: Minimum Less gross lease- Minimum Less rental related net rental sub-let Net payments costs1 payments rentals payment £m £m £m £m £m Year ending 31 December 2019 612.4 (54.2) 558.2 (11.5) 546.7 2020 475.0 (51.0) 424.0 (6.4) 417.6 2021 415.3 (47.3) 368.0 (4.9) 363.1 2022 362.4 (44.8) 317.6 (4.3) 313.3 2023 323.4 (43.1) 280.3 (3.1) 277.2 Later years 2,074.1 (362.5) 1,711.6 (1.3) 1,710.3 4,262.6 (602.9) 3,659.7 (31.5) 3,628.2 Note 1 Lease-related costs include real estate taxes, insurance costs and operating costs embedded in the rental payments to the landlord. 4. SHARE OF RESULTS OF ASSOCIATES Share of results of associates include: 2018 2017 2016 £m £m £m Share of pro?t before interest and taxation 123.8 145.1 97.1 Share of exceptional (losses)/gains (41.7) 0.8 (15.2) Share of interest and non-controlling interests (9.7) (7.8) (4.7) Share of taxation (28.9) (24.6) (27.4) 43.5 113.5 49.8 5. OUR PEOPLE Our staff numbers averaged 133,903 for the year ended 31 December 2018 against 134,428 in 2017 and 132,657 in 2016. Their geographical distribution was as follows: 2018 2017 2016 North America 25,990 27,399 27,246 UK 14,331 14,197 14,070 Western Continental Europe 26,825 25,700 24,996 Middle Asia Paci?c, East and Latin Central America, & Eastern Africa & Europe 66,757 67,132 66,345 133,903 134,428 132,657 Their reportable segment distribution was as follows: 2018 2017 2016 Advertising and Media Investment Management 55,421 56,789 55,120 Data Investment Management 28,309 28,629 29,279 Public Relations & Public Affairs 9,048 9,082 9,054 and Brand Specialist Consulting, Communications Health & Wellness 41,125 39,928 39,204 133,903 134,428 132,657 At the end of 2018, staff numbers were 134,281 (2017: 134,413, 2016: 134,341). Staff costs include: 2018 2017 2016 £m £m £m Wages and salaries 5,710.0 5,832.3 5,395.6 Cash-based incentive plans 240.7 219.2 260.2 Share-based incentive plans (note 21) 84.8 105.0 106.5 Social security costs 717.5 720.3 658.1 Pension costs (note 22) 191.2 192.0 178.1 Severance 37.5 39.5 34.5 Other staff costs1 1,190.9 1,210.7 1,151.9 8,172.6 8,319.0 7,784.9 Staff cost to revenue less pass-through costs2 ratio 63.7% 63.2% 62.6% Notes 1 Freelance and temporary staff costs are included in other staff costs. 2 Revenue less pass-through costs is de?ned in note 29. Included above are charges of £2.0 million (2017: £12.3 million, 2016: £15.5 million) for share-based incentive plans in respect of key management personnel (who comprise the Directors of the Group). Further details of compensation for key management personnel are disclosed on pages 104-119. WPP ANNUAL REPORT 2018 135

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. FINANCE INCOME, FINANCE COSTS AND REVALUATION OF FINANCIAL INSTRUMENTS Finance income includes: 2018 2017 2016 £m £m £m Income from equity investments 15.4 16.8 12.5 Interest income 89.4 78.4 67.9 104.8 95.2 80.4 Finance costs include: 2018 2017 2016 £m £m £m Net interest expense on pension plans (note 22) 4.4 6.3 6.7 Interest on other long-term employee bene?ts 4.0 3.9 2.7 Interest expense and similar charges1 280.9 259.6 245.1 289.3 269.8 254.5 Revaluation of financial instruments include: 2018 2017 2016 £m £m £m Movements in fair value of treasury instruments (12.4) 1.1 (19.5) Revaluation through pro?t of or investments loss held at fair value 68.2 – –non-controlling Revaluation of put interests options over 34.5 52.5 (17.2) Revaluation agreements) of payments due to vendors (earnout 82.6 208.6 (11.6) 172.9 262.2 (48.3) Note 1 Interest expense and similar charges are payable on bank overdrafts, bonds and bank loans held at amortised cost. The majority of the Group’s long-term debt is represented by $2,784 million of US dollar bonds at an average interest rate of 4.46%, €3,700 million of Eurobonds at an average interest rate of 1.64% and £600 million of Sterling bonds at an average interest rate of 4.04%. Average borrowings under the US Dollar Revolving Credit Facilities (note 10) amounted to the equivalent of $125 million at an average interest rate of 0.96% (2017: $715 million at an average interest rate of 0.78%). Average borrowings under the Australian dollar Revolving Credit Facilities, amounted to A$439 million at an average rate of 3.27% (2017: A$412 million at an average rate of 3.24%). Average borrowings under the US Commercial Paper Programme for 2018 amounted to $540 million at an average interest rate of 2.28% inclusive of margin (2017: $860 million at an average interest rate of 1.47% inclusive of margin). 7. TAXATION The tax rate on reported profit before tax was 22.1% (2017: 9.3%, 2016: 20.6%). The headline tax rate was 22.5% (2017: 22.0%, 2016: 21.0%). The cash tax rate on headline PBT was 20.6% (2017: 20.3%, 2016: 20.9%). On 22 December 2017, The Tax Cuts and Jobs Act was enacted in the US which reduced the federal tax rate from 35% to 21% from 1 January 2018. As a result, deferred tax assets and liabilities were remeasured at the end of 2017, leading to a non-cash credit to the income statement of £234.1 million, partially offset by a one-time deemed repatriation tax charge related to unremitted foreign earnings of £28.1 million, payable over eight years. The impact of US tax reform has been excluded from the headline tax charge. The tax charge comprises: 2018 2017 2016 £m £m £m Corporation tax Current year 481.9 523.4 569.4 Prior years (111.8) (98.6) (80.3) 370.1 424.8 489.1 Deferred tax Current year (49.0) (235.2) (88.0) Prior years 2.8 7.4 (12.2) (46.2) (227.8) (100.2) Tax charge 323.9 197.0 388.9 The corporation tax credit for prior years in 2018, 2017 and 2016, mainly comprises the release of a number of provisions following the resolution of tax matters in various countries. The tax charge for the year can be reconciled to profit before taxation in the consolidated income statement as follows: 2018 2017 2016 £m £m £m Pro?t before taxation 1,463.3 2,109.3 1,890.5 Tax at the corporation tax rate of 19.0%1 278.0 406.0 378.1 Tax effect of share of results of associates (8.3) (21.8) (10.0) Irrecoverable withholding taxes 55.9 37.0 36.3 Items in determining that are not taxable deductible/(taxable) pro?t 28.7 (3.9) 9.4 Effect in other of jurisdictions different tax rates in subsidiaries operating 90.2 140.3 60.4 US foreign Transition earnings Tax related to unremitted (7.3) 28.1 –Effect balances of change in US tax rate on deferred tax – (234.1) –Origination differences and reversal of unrecognised temporary 7.5 (17.2) (4.3) Tax losses not recognised or utilised in the year 22.3 32.5 52.2 Utilisation of tax losses not previously recognised (25.6) (10.4) (11.3) Recognition not previously of recognised temporary differences (8.4) (68.3) (29.4) Net in relation release to of acquired prior year businesses provisions (20.4) (15.0) (23.3) Other prior year adjustments (88.7) (76.2) (69.2) Tax charge 323.9 197.0 388.9 Effective tax rate on pro?t before tax 22.1% 9.3% 20.6% Note 1 The Parent Company of the Group is tax resident in the UK. As the Group is subject to the tax rates of more than one country, it has chosen to present its reconciliation of the tax charge using the UK corporation tax rate of 19% (2017: 19.25%, 2016: 20%). The headline tax charge excludes the impact of items that are excluded from headline PBT and excludes the deferred tax impact of the amortisation of acquired intangible assets and other goodwill items as these will only reverse in the event of future disposals of those assets, in which case any accounting gain or loss would be excluded from headline profits. The impact of the Tax Cuts and Jobs Act has also been excluded from the headline tax charge. 136 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The calculation of the headline tax rate is as follows: 2018 2017 2016 £m £m £m Headline PBT1 1,862.8 2,092.5 1,986.2 Tax charge 323.9 197.0 388.9 Tax investments (charge)/credit and subsidiaries relating to gains on disposal of (0.8) 2.1 (1.1) Tax transformation credit/(charge) costs relating to restructuring and 52.3 10.0 (3.0) Deferred of investments tax relating and subsidiaries to gains on disposal (0.7) 0.2 3.2 Net tax impact of US tax reform 14.3 206.0 –Deferred acquired intangible tax impact assets of the and amortisation other goodwill of items 30.1 45.0 29.2 Headline tax charge 419.1 460.3 417.2 Headline tax rate 22.5% 22.0% 21.0% Note 1 Headline PBT is de?ned in note 29. FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS Given the Group’s geographic mix of profits and the changing international tax environment, the tax rate is expected to increase slightly over the next few years. Factors that may affect the Group’s future tax charge include the levels and mix of profits in the many countries in which we operate, the prevailing tax rates in each of those countries and also the foreign exchange rates that apply to those profits. The tax charge may also be affected by the impact of acquisitions, disposals and other corporate restructurings, the resolution of open tax issues, future planning, and the ability to use brought forward tax losses. Furthermore, changes in local or international tax rules, for example prompted by the OECD’s Base Erosion and Profit Shifting project (a global initiative to improve the fairness and integrity of tax systems), or new challenges by tax or competition authorities, for example, the European Commission’s state aid investigation into Group Financing Exemption in the UK CFC rules announced in October 2017, may expose us to additional tax liabilities or impact the carrying value of our deferred tax assets, which would affect the future tax charge. The Group has a number of open tax returns and various ongoing tax audits worldwide but does not currently expect material additional tax exposures to arise, above the amounts provided, as and when the audits are concluded. Liabilities relating to these open and judgemental matters are based upon estimates of whether additional taxes will be due after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts which were initially recorded then such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. TAX RISK MANAGEMENT We maintain constructive engagement with the tax authorities and relevant government representatives, as well as active engagement with a wide range of international companies and business organisations with similar issues. We engage advisors and legal counsel to obtain opinions on tax legislation and principles. We have a Tax Risk Management Strategy in place which sets out the controls established and our assessment procedures for decision-making and how we monitor tax risk. We monitor proposed changes in taxation legislation and ensure these are taken into account when we consider our future business plans. Our Directors are informed by management of any tax law changes, the nature and status of any significant ongoing tax audits, and other developments that could materially affect the Group’s tax position. 8. ORDINARY DIVIDENDS Amounts recognised as distributions to equity holders in the year: 2018 2017 2016 2018 2017 2016 Per share Pence per share £m £m £m 2017 Final dividend 37.30p 37.05p 28.78p 464.6 467.2 368.5 2018 Interim dividend 22.70p 22.70p 19.55p 282.8 284.3 248.0 60.00p 59.75p 48.33p 747.4 751.5 616.5 2018 2017 2016 2018 2017 2016 Per ADR1 Cents per ADR $m $m $m 2017 Final dividend 240.34¢ 250.96¢ 219.99¢ 598.7 632.9 563.4 2018 Interim dividend 151.53¢ 146.27¢ 132.42¢ 377.6 366.4 335.9 391.87¢ 397.23¢ 352.41¢ 976.3 999.3 899.3 Proposed final dividend for the year ended 31 December 2018: 2018 2017 2016 Per share Pence per share Final dividend 37.30p 37.30p 37.05p 2018 2017 2016 Per ADR1 Cents per ADR Final dividend 249.00¢ 240.34¢ 250.96¢ Note 1 These ?gures have been translated for convenience purposes only, using the approximate average rate for the year shown on page 127. This conversion should not be construed as a representation that the pound sterling amounts actually represent, or could be converted into, US dollars at the rates indicated. The payment of dividends will not have any tax consequences for the Group. 9. EARNINGS PER SHARE BASIC EPS The calculation of basic reported and headline EPS is as follows: 2018 2017 2016 Reported earnings1 (£m) 1,062.9 1,816.6 1,400.1 Headline earnings (£m) (note 29) 1,362.5 1,536.5 1,467.5 Average shares used in basic EPS calculation (m) 1,247.8 1,261.1 1,277.8 Reported EPS 85.2p 144.0p 109.6p Headline EPS 109.2p 121.8p 114.8p Note 1 Reported earnings is equivalent to pro?t for the year attributable to equity holders of the parent. DILUTED EPS The calculation of diluted reported and headline EPS is as follows: 2018 2017 2016 Diluted reported earnings (£m) 1,062.9 1,816.6 1,400.1 Diluted headline earnings (£m) 1,362.5 1,536.5 1,467.5 Average shares used in diluted EPS calculation (m) 1,261.2 1,275.8 1,296.0 Diluted reported EPS 84.3p 142.4p 108.0p Diluted headline EPS 108.0p 120.4p 113.2p Diluted EPS has been calculated based on the diluted reported and diluted headline earnings amounts above. At 31 December 2018, options to purchase 16.9 million ordinary shares (2017: 8.2 million, 2016: 8.4 million) were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Group’s shares and, therefore, their inclusion would have been accretive. WPP ANNUAL REPORT 2018 137

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A reconciliation between the shares used in calculating basic and diluted EPS is as follows: 2018 2017 2016 m m m Average shares used in basic EPS calculation 1,247.8 1,261.1 1,277.8 Dilutive share options outstanding 1.6 1.8 2.4 Other potentially issuable shares 11.8 12.9 15.8 Shares used in diluted EPS calculation 1,261.2 1,275.8 1,296.0 At 31 December 2018 there were 1,332,678,227 (2017: 1,332,511,552, 2016: 1,331,880,730) ordinary shares in issue. 10. SOURCES OF FINANCE The following table summarises the equity and debt financing of the Group, and changes during the year: Shares Debt 2018 2017 2018 2017 £m £m £m £m Analysis of changes in ?nancing Beginning of year 701.8 695.4 6,481.3 6,033.1 Ordinary shares issued 1.2 6.4 – –bank Net (decrease)/increase loans and corporate in bonds drawings on – – (440.6) 599.6 Amortisation in debt of ?nancing costs included – – 7.7 8.0 Other movements – – (10.1) (6.9) Exchange adjustments – – 179.6 (152.5) End of year 703.0 701.8 6,217.9 6,481.3 Note The table above excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash ?ow statement. SHARES At 31 December 2018, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £703.0 million (2017: £701.8 million), further details of which are disclosed in note 25. DEBT US$ bonds The Group has in issue $812 million of 4.75% bonds due November 2021, $500 million of 3.625% bonds due September 2022, $750 million of 3.75% bonds due September 2024, $272 million of 5.125% bonds due September 2042 and $450 million of 5.625% bonds due November 2043. Eurobonds The Group has in issue €600 million of 0.75% bonds due November 2019, €750 million of 3% bonds due November 2023, €750 million of 2.25% bonds due September 2026, €600 million of 1.625% bonds due March 2030 and €250 million of Floating Rate Notes carrying a coupon of 3m EURIBOR + 0.32% due May 2020. In March 2018, the Group issued €250 million of Floating Rate Notes carrying a coupon of 3m EURIBOR + 0.45% due March 2022 and €500 million of 1.375% bonds due March 2025. Sterling bonds The Group has in issue £200 million of 6.375% bonds due November 2020 and £400 million of 2.875% bonds due September 2046. On 27 March 2019, the Group repaid the £200 million of 6.375% bonds due in 2020 following a tender offer. Revolving Credit Facility The Group has a five-year Revolving Credit Facility of $2.5 billion due July 2021. On 15 March 2019, the Group refinanced the facility and extended the term of the $2.5 billion five-year revolving credit facility to March 2024. The Group’s borrowing under these facilities, which are drawn down predominantly in US dollars and pounds sterling, averaged the equivalent of $125 million in 2018. The Group has a A$150 million Revolving Credit Facility due June 2019 and a A$370 million Revolving Credit Facility due June 2021. The Group’s borrowings under the Australian dollar facilities which were drawn down in Australian dollars and New Zealand dollars, averaged the equivalent of A$439 million in 2018. The Group had available undrawn committed credit facilities of £2,074.7 million at 31 December 2018 (2017: £1,163.8 million). Borrowings under the $2.5 billion Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of the Group. Borrowings under the A$150 million Revolving Credit Facility and the A$370 million Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of WPP AUNZ. US COMMERCIAL PAPER PROGRAMME The Group operates a commercial paper programme using its Revolving Credit Facility as a backstop. The average commercial paper outstanding in 2018 was $540.0 million. There was no US Commercial Paper outstanding at 31 December 2018. The following table is an analysis of future anticipated cash flows in relation to the Group’s debt, on an undiscounted basis which, therefore, differs from the fair value and carrying value: 2018 2017 £m £m Within one year (748.4) (391.7) Between one and two years (596.8) (896.3) Between two and three years (937.1) (584.3) Between three and four years (742.5) (1,537.8) Between four and ?ve years (786.8) (487.9) Over ?ve years (4,199.7) (4,519.1) Credit Debt ?nancing Facility and (including in relation interest) to unsecured under the loan Revolving notes (8,011.3) (8,417.1) Short-term overdrafts – within one year (442.0) (393.2) Future anticipated cash ?ows (8,453.3) (8,810.3) Effect of discounting/?nancing rates 1,793.4 1,935.8 Debt ?nancing (6,659.9) (6,874.5) Cash and short-term deposits 2,643.2 2,391.4 Net debt (4,016.7) (4,483.1) Analysis of fixed and floating rate debt by currency including the effect of interest rate and cross-currency swaps: 2018 Fixed Floating Period Currency £m rate1 basis (months)1 $ – fixed 1,154.8 4.58 n/a 181 – floating 1,029.6 n/a LIBOR n/a £ – fixed 1,044.1 3.43 n/a 232 € – fixed 2,425.9 1.99 n/a 75 – floating 449.2 n/a EURIBOR n/a Other 114.3 n/a n/a n/a 6,217.9 2017 Fixed Floating Period Currency £m rate1 basis (months)1 $ – fixed 1,146.1 4.62% n/a 199 – floating 1,760.9 n/a LIBOR n/a £ – fixed 600.0 4.04% n/a 245 € – fixed 2,623.9 1.85% n/a 80 – floating 222.2 n/a EURIBOR n/a Other 128.2 n/a n/a n/a 6,481.3 Note 1 Weighted average. These rates do not include the effect of gains on interest rate swap terminations that are written to income over the life of the original instrument. The following table is an analysis of future anticipated cash flows in relation to the Group’s financial derivatives, which include interest rate swaps, forward contracts and other foreign exchange swaps: Financial liabilities Financial assets Payable Receivable Payable Receivable 2018 £m £m £m £m Within one year 229.3 221.9 124.6 120.6 Between one and two years 50.0 45.3 11.8 6.5 Between two and three years 688.4 685.3 11.5 6.4 Between three and four years 408.5 406.6 11.6 6.5 Between four and five years – – 11.6 6.6 Over five years – – 461.4 498.2 1,376.2 1,359.1 632.5 644.8 138 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Financial liabilities Financial assets Acquisitions and disposals: Payable Receivable Payable Receivable 2017 £m £m £m £m 2018 2017 2016 Within one year 97.8 96.7 123.7 128.8 £m £m £m Between one and two years 21.4 20.1 38.6 38.8 Initial cash consideration (126.7) (214.8) (424.1) Between two and three years 20.5 18.8 39.5 38.6 Cash and cash equivalents acquired (net)1 (3.8) 28.9 57.3 Between three and four years 20.7 18.6 851.7 851.0 Earnout payments (120.2) (199.1) (92.3) Between four and five years 523.5 521.1 – – Purchase associates) of other investments (including (48.1) (92.5) (260.2) Over five years – – – – Acquisitions (298.8) (477.5) (719.3) 683.9 675.3 1,053.5 1,057.2 Proceeds on disposal of investments and subsidiaries2 849.0 296.0 80.5 11. ANALYSIS OF CASH FLOWS Acquisitions and disposals 550.2 (181.5) (638.8) The following tables analyse the items included within the main cash flow Cash consideration for non-controlling interests (109.9) (47.3) (58.3) headings on page 129. Net cash in?ow/(out?ow) 440.3 (228.8) (697.1) Net cash from operating activities: Notes 1 In 2018, cash and cash equivalents acquired comprises £11.3 million from acquisitions offset by 2018 2017 2016 £15.1 million from disposals. £m £m £m 2 Proceeds on disposal of investments and subsidiaries includes return of capital from investments Pro?t for the year 1,139.4 1,912.3 1,501.6 in associates. Taxation 323.9 197.0 388.9 Revaluation of ?nancial instruments (172.9) (262.2) 48.3 Share repurchases and buy-backs: Finance costs 289.3 269.8 254.5 2018 2017 2016 Finance income (104.8) (95.2) (80.4) £m £m £m Share of results of associates (43.5) (113.5) (49.8) Purchase of own shares by ESOP Trusts (102.8) (214.6) (152.9) Operating pro?t 1,431.4 1,908.2 2,063.1 Shares purchased into treasury (104.3) (289.6) (274.5) Adjustments for: Net cash out?ow (207.1) (504.2) (427.4) Non-cash share options) share-based incentive plans (including 84.8 105.0 106.5 Net (decrease)/increase in borrowings: Depreciation of property, plant and equipment 225.1 230.7 220.8 Impairment of goodwill 183.9 27.1 27.0 2018 2017 2016 Amortisation and impairment of acquired £m £m £m intangible assets 280.0 195.1 168.4 (Decrease)/increase in drawings on bank loans (819.3) 785.6 (30.4) Amortisation of other intangible assets 38.7 36.3 38.6 Proceeds from issue of €250 million bonds 218.8 214.0 –Investment write-downs 2.0 95.9 86.1 Proceeds from issue of €500 million bonds 438.0 – –Gains on disposal of investments and subsidiaries (235.5) (129.0) (44.3) Repayment of €252 million bonds (220.0) – –(Gains)/losses interests arising on from remeasurement a change in scope of equity of Partial repayment of $300 million bonds (20.8) – –Partial repayment of $500 million bonds (37.3) – –ownership (2.0) 0.3 (232.4) Repayment of £400 million bonds – (400.0) –Losses on sale of property, plant and equipment 0.6 1.1 0.8 Proceeds from issue of £400 million bonds – – 400.0 Operating cash ?ow before movements in working capital and provisions 2,009.0 2,470.7 2,434.6 Repayment of €498 million bonds – – (392.1) Increase in trade receivables and accrued income (298.9) (90.4) (70.4) Net cash (out?ow)/in?ow (440.6) 599.6 (22.5) Increase/(decrease) in trade payables and deferred income 500.9 (170.8) 188.7 Cash and cash equivalents: (Increase)/decrease in other receivables (52.9) (110.6) 77.4 2018 2017 2016 Decrease in other payables – short-term (31.8) (122.8) (303.7) £m £m £m Increase in other payables – long-term 0.4 20.1 4.5 Cash at bank and in hand 2,010.8 2,049.6 2,256.2 Increase/(decrease) in provisions 48.0 (57.3) (47.8) Short-term bank deposits 632.4 341.8 180.7 Cash generated by operations 2,174.7 1,938.9 2,283.3 Overdrafts1 (442.0) (393.2) (534.3) Corporation and overseas tax paid (383.6) (424.7) (414.2) 2,201.2 1,998.2 1,902.6 Interest and similar charges paid (252.8) (246.6) (242.1) Interest received 90.4 76.9 73.9 Note Investment income 15.4 16.8 12.5 1 Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management. Dividends from associates 49.7 46.8 60.4 Net cash in?ow from operating activities 1,693.8 1,408.1 1,773.8 The Group considers that the carrying amount of cash and cash equivalents approximates their fair value. WPP ANNUAL REPORT 2018 139

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. INTANGIBLE ASSETS GOODWILL The movements in 2018 and 2017 were as follows: £m Cost: 1 January 2017 13,939.4 Additions1 301.0 Revision of earnout estimates (60.7) Exchange adjustments (504.4) 31 December 2017 13,675.3 Additions1 154.4 Revision of earnout estimates (68.3) Exchange adjustments 368.1 31 December 2018 14,129.5 Accumulated impairment losses and write-downs: 1 January 2017 725.1 Impairment losses for the year 27.1 Exchange adjustments (29.8) 31 December 2017 722.4 Impairment losses for the year 183.9 Exchange adjustments 20.4 31 December 2018 926.7 Net book value: 31 December 2018 13,202.8 31 December 2017 12,952.9 1 January 2017 13,214.3 Note 1 Additions represent goodwill arising on the acquisition of subsidiary undertakings including the effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. The effect of such revisions was not material in either year presented. Goodwill arising on the acquisition of associate undertakings is shown within interests in associates and joint ventures in note 14. Cash-generating units with significant goodwill as at 31 December are: 2018 2017 £m £m GroupM 2,942.9 2,906.7 Kantar 2,522.9 2,518.2 Wunderman 1,581.2 1,514.5 VMLY&R 930.4 1,091.8 Other 5,225.4 4,921.7 Total goodwill 13,202.8 12,952.9 Other goodwill represents goodwill on a large number of cash-generating units, none of which is individually significant in comparison to the total carrying value of goodwill. OTHER INTANGIBLE ASSETS The movements in 2018 and 2017 were as follows: Brands with an inde?nite Acquired useful life intangibles Other Total £m £m £m £m Cost: 1 January 2017 1,141.3 2,535.5 404.1 4,080.9 Additions – – 37.3 37.3 Disposals – – (15.8) (15.8) New acquisitions – 79.0 0.8 79.8 Other movements1 – 6.4 7.2 13.6 Exchange adjustments (60.0) (73.1) (22.1) (155.2) 31 December 2017 1,081.3 2,547.8 411.5 4,040.6 Additions – – 60.4 60.4 Disposals – (0.9) (37.3) (38.2) New acquisitions – 40.3 – 40.3 Other movements1 – 2.9 (7.4) (4.5) Exchange adjustments 51.5 19.9 10.1 81.5 31 December 2018 1,132.8 2,610.0 437.3 4,180.1 Amortisation and impairment: 1 January 2017 – 1,563.0 300.6 1,863.6 Charge for the year – 189.4 36.3 225.7 Disposals – – (14.9) (14.9) Other movements – – 2.5 2.5 Exchange adjustments – (33.7) (21.0) (54.7) 31 December 2017 – 1,718.7 303.5 2,022.2 Charge for the year – 275.8 38.7 314.5 Disposals – (0.7) (27.3) (28.0) Other movements – – (1.9) (1.9) Exchange adjustments – 21.4 9.9 31.3 31 December 2018 – 2,015.2 322.9 2,338.1 Net book value: 31 December 2018 1,132.8 594.8 114.4 1,842.0 31 December 2017 1,081.3 829.1 108.0 2,018.4 1 January 2017 1,141.3 972.5 103.5 2,217.3 Note 1 Other movements in acquired intangibles include revisions to fair value adjustments arising on the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. Brands with an indefinite life are carried at historical cost in accordance with the Group’s accounting policy for intangible assets. The carrying values of the separately identifiable brands are not individually significant in comparison with the total carrying value of brands with an indefinite useful life. Acquired intangible assets at net book value at 31 December 2018 include brand names of £361.2 million (2017: £445.6 million), customer-related intangibles of £220.6 million (2017: £360.9 million), and other assets (including proprietary tools) of £13.0 million (2017: £22.6 million). The total amortisation and impairment of acquired intangible assets of £280.0 million (2017: £195.1 million) includes an impairment charge of £126.1 million (2017: £6.0 million) comprising £58.6 million in regard to certain brand names that are no longer in use and £67.5 million in regard to customer relationships where the underlying clients have been lost. £70.6 million of the impairment charge relates to the Advertising and Media Investment Management segment, £38.2 million relates to the Data Investment Management segment, and £17.3 million relates to the Brand Consulting, Health & Wellness and Specialist Communications segment. In addition, the total amortisation and impairment of acquired intangible assets includes £4.2 million (2017: £5.7 million) in relation to associates. In accordance with the Group’s accounting policy, the carrying values of goodwill and intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. 140 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The impairment review is undertaken annually on 30 September. The review assessed whether the carrying value of goodwill and intangible assets with indefinite useful lives was supported by the net present value of future cash flows, using a pre-tax discount rate of 9.0% (2017: 8.5%) and management forecasts for a projection period of up to five years, followed by an assumed annual long-term growth rate of 3.0% (2017: 3.0%) and no assumed improvement in operating margin. Management have made the judgement that this long-term growth rate does not exceed the long-term average growth rate for the industry. The goodwill impairment charge of £183.9 million (2017: £27.1 million) primarily relates to a charge of £148.0 million on VMLY&R, driven by challenges in the advertising businesses in the Advertising and Media Investment Management segment. The recoverable amount for the VMLY&R cash-generating unit is £1,327.3 million. It is based on a value in use calculation, assuming a pre-tax discount rate of 8.7% specific to VMLY&R. A pre-tax discount rate of 8.5% was used in the prior year. The cash-generating unit includes goodwill, intangible assets, and other assets. The remaining £35.9 million relates to a number of under-performing businesses in the Group. In certain markets, the impact of local economic conditions and trading circumstances on these businesses was sufficiently severe to indicate impairment to the carrying value of goodwill. The VMLY&R impairment review is sensitive to changes in the assumptions used, most notably to changes in the discount rate, terminal growth rate and terminal margin. A summary of the movements in the impairment charge from a change in these assumptions is as follows: – 0.1% movement in the discount rate would increase or decrease the impairment charge by £23 million; – 0.1% movement in the terminal growth rate would increase or decrease the impairment charge by £19 million; and – 0.1% movement in terminal margin would increase or decrease the impairment charge by £8 million. Under IFRS, an impairment charge is required for both goodwill and other indefinite-lived assets when the carrying amount exceeds the ‘recoverable amount’, defined as the higher of fair value less costs to sell and value in use. Our approach in determining the recoverable amount utilises a discounted cash flow methodology, which necessarily involves making numerous estimates and assumptions regarding revenue growth, operating margins, appropriate discount rates and working capital requirements. The key assumptions used for estimating cash flow projections in the Group’s impairment testing are those relating to revenue growth and operating margin. The key assumptions take account of the businesses’ expectations for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the unit’s historical performance and any other circumstances particular to the unit, such as business strategy and client mix. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of cash-generating unit identified for impairment testing and the criteria used to determine which assets should be aggregated. A difference in testing levels could affect whether an impairment is recorded and the extent of impairment loss. For the 2018 impairment review, certain assets previously aggregated with the VMLY&R cash-generating unit have been realigned to other cash-generating units as part of the overall effort to simplify operations and become more client-centric. Changes in our business activities or structure may also result in additional changes to the level of testing in future periods. Further, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired. Any resulting impairment loss could have a material impact on the Group’s financial condition and results of operations. Historically our impairment losses have resulted from a specific event, condition or circumstance in one of our companies, such as the loss of a significant client. As a result, changes in the assumptions used in our impairment model have not had a significant effect on the impairment charges recognised and a reasonably possible change in assumptions would not lead to a significant impairment, except for VMLY&R as discussed above. The carrying value of goodwill and other intangible assets will continue to be reviewed at least annually for impairment and adjusted down to the recoverable amount if required. 13. PROPERTY, PLANT AND EQUIPMENT The movements in 2018 and 2017 were as follows: Fixtures, Freehold Leasehold ?ttings and Computer Land buildings buildings equipment equipment Total £m £m £m £m £m £m Cost: 1 January 2017 37.1 126.4 1,012.5 402.6 743.4 2,322.0 Additions – 4.3 165.0 31.7 87.9 288.9 New acquisitions – – 2.0 2.4 1.1 5.5 Disposals – (1.2) (46.1) (40.7) (54.6) (142.6) Exchange adjustments – (10.7) (51.6) (18.8) (74.8) (155.9) 31 December 2017 37.1 118.8 1,081.8 377.2 703.0 2,317.9 Additions – 17.7 161.4 49.9 85.8 314.8 New acquisitions – 0.1 0.9 1.2 0.9 3.1 Disposals – – (83.5) (62.9) (109.3) (255.7) Exchange adjustments – (1.1) 41.8 9.9 10.0 60.6 31 December 2018 37.1 135.5 1,202.4 375.3 690.4 2,440.7 Depreciation: 1 January 2017 – 25.2 509.8 240.0 578.3 1,353.3 Charge for the year – 6.9 86.7 47.0 90.1 230.7 Disposals – (1.9) (42.6) (35.9) (54.4) (134.8) Exchange adjustments – (1.7) (27.8) (14.2) (67.1) (110.8) 31 December 2017 – 28.5 526.1 236.9 546.9 1,338.4 Charge for the year – 3.1 91.5 44.4 86.1 225.1 Disposals – – (74.6) (58.0) (107.9) (240.5) Exchange adjustments – (4.5) 24.3 6.4 8.5 34.7 31 December 2018 – 27.1 567.3 229.7 533.6 1,357.7 Net book value: 31 December 2018 37.1 108.4 635.1 145.6 156.8 1,083.0 31 December 2017 37.1 90.3 555.7 140.3 156.1 979.5 1 January 2017 37.1 101.2 502.7 162.6 165.1 968.7 At 31 December 2018, capital commitments contracted, but not provided for in respect of property, plant and equipment were £28.4 million (2017: £137.2 million). WPP ANNUAL REPORT 2018 141

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. INTERESTS IN ASSOCIATES, JOINT VENTURES AND OTHER INVESTMENTS The movements in 2018 and 2017 were as follows: Interests in associates and joint Other ventures investments £m £m 1 January 2017 1,069.4 1,310.3 Additions 34.5 67.7 Share of results of associate undertakings (note 4) 113.5 –Dividends (46.8) –Other movements 3.4 –Reclassification from other investments to associates 57.1 (57.1) Exchange adjustments (10.6) (106.1) Disposals (139.1) (1.7) Reclassification to subsidiaries (6.3) –Revaluation of other investments – 32.1 Amortisation of other intangible assets (5.7) –Write-downs (4.2) (91.7) 31 December 2017 1,065.2 1,153.5 Additions 16.7 35.0 Share of results of associate undertakings (note 4) 43.5 –Dividends (49.7) –Other movements 1.2 –Reclassification from other investments to associates 0.3 (0.3) Exchange adjustments 12.9 –Disposals (304.0) (341.7) Reclassification to subsidiaries 16.9 –Revaluation of other investments through profit or loss – 68.1 Revaluation comprehensive of other income investments through other – (247.9) Amortisation of other intangible assets (4.2) –Write-downs (2.0) – 31 December 2018 796.8 666.7 The investments included above as ‘other investments’ represent investments in equity securities that present the Group with opportunity for return through dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. For unlisted securities, where market value is not available, the Group has estimated relevant fair values on the basis of publicly available information from outside sources. The carrying values of the Group’s associates and joint ventures are reviewed for impairment in accordance with the Group’s accounting policies. The Group’s principal associates and joint ventures at 31 December 2018 included: % Country of owned incorporation Barrows Design and Manufacturing (Pty) Limited 35.0 South Africa Chime Communications Ltd 24.9 UK CVSC Sofres Media Co Limited 40.0 China Dat Viet VAC Media Corporation 30.0 Vietnam GIIR Inc 30.0 Korea Haworth Marketing & Media Company 49.0 USA High Co SA 34.1 France Imagina 22.5 Spain Marktest Investimentos SGPS S.A. 40.0 Portugal Nanjing Yindu Ogilvy Advertising Co. Ltd 49.0 China Richard Attias and Associates1 49.0 USA Smollan Holdings (Pty) Ltd 24.8 South Africa Note 1 The Group sold its shareholding in Richard Attias and Associates in January 2019. The market value of the Group’s shares in its principal listed associate undertakings at 31 December 2018 was as follows: GIIR Inc: £26.3 million, and High Co SA: £30.3 million (2017: GIIR Inc: £35.4 million and High Co SA: £33.3 million). The carrying value (including goodwill and other intangibles) of these equity interests in the Group’s consolidated balance sheet at 31 December 2018 was as follows: GIIR Inc: £46.8 million and High Co SA: £37.1 million (2017: GIIR Inc: £41.6 million and High Co SA: £34.5 million). Where the market value of the Group’s listed associates is less than the carrying value, an impairment review is performed utilising the discounted cash flow methodology discussed in note 12. The Group’s investments in its principal associate undertakings are represented by ordinary shares. SUMMARISED FINANCIAL INFORMATION The following tables present a summary of the aggregate financial performance and net asset position of the Group’s associate undertakings and joint ventures. These have been estimated and converted, where appropriate, to an IFRS presentation based on information provided by the relevant companies at 31 December 2018. 2018 2017 2016 £m £m £m Income statement Revenue 3,685.8 3,800.8 2,254.5 Operating pro?t 378.4 440.4 308.3 Pro?t before taxation 194.7 381.9 237.2 Pro?t for the year 118.1 312.5 156.7 Balance sheet Assets 2,940.9 3,192.9 4,223.1 Liabilities (1,570.6) (1,633.7) (1,900.0) Net assets 1,370.3 1,559.2 2,323.1 The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the Group has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. At 31 December 2018, capital commitments contracted, but not provided for in respect of interests in associates and other investments were £31.4 million (2017: £54.2 million). 142 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS 15. DEFERRED TAX The Group’s deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 12 Income taxes. The recognition of deferred tax assets is determined by reference to the Group’s estimate of recoverability, using models where appropriate to forecast future taxable profits. Deferred tax assets have only been recognised for territories where the Group considers that it is probable that all or a portion of the deferred tax assets will be realised. The main factors that we consider include: – the future earnings potential determined through the use of internal – the history of losses carried forward and other tax assets expiring; forecasts; – the timing of future reversal of taxable temporary differences; – the cumulative losses in recent years; – the expiry period associated with the deferred tax assets; and – the various jurisdictions in which the potential deferred tax assets arise; – the nature of the income that can be used to realise the deferred tax asset. If it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to that portion. If market conditions improve and future results of operations exceed our current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deteriorate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed. Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes: As As Gross Offset reported Gross Offset reported 2018 2018 2018 2017 2017 2017 £m £m £m £m £m £m Deferred tax assets 412.0 (259.0) 153.0 411.8 (251.5) 160.3 Deferred tax liabilities (738.5) 259.0 (479.5) (765.2) 251.5 (513.7) (326.5) – (326.5) (353.4) – (353.4) The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2018 and 2017: Accounting Retirement Property, Other Deferred provisions bene?t plant and Tax losses Share-based Restructuring temporary compensation and accruals obligations equipment and credits payments provisions differences Total £m £m £m £m £m £m £m £m £m 1 January 2017 95.6 80.6 141.4 70.8 89.7 75.8 5.9 38.2 598.0 Acquisition of subsidiaries – – – – – – – 2.6 2.6 (Charge)/credit to income (5.5) 6.6 (10.2) 6.9 (34.4) (0.4) (1.5) (21.7) (60.2) Impact of US tax reform (30.8) (8.1) (29.1) (6.8) 23.1 (10.9) 1.6 (1.1) (62.1) Charge to other comprehensive income – – (20.9) – – – – – (20.9) Charge to equity – – – – – (27.3) – – (27.3) Exchange differences (5.8) 5.8 (5.6) (2.5) (5.7) (4.2) (0.2) (0.1) (18.3) 31 December 2017 53.5 84.9 75.6 68.4 72.7 33.0 5.8 17.9 411.8 Acquisition of subsidiaries – – – – – – – 2.0 2.0 Credit/(charge) to income 4.7 13.0 (11.2) (20.6) (8.9) (15.3) 10.7 11.0 (16.6) Charge to other comprehensive income – – (0.2) – – – – – (0.2) Charge to equity – – – – – (1.6) – – (1.6) Exchange differences 3.4 3.5 4.3 0.1 3.3 0.7 0.8 0.5 16.6 31 December 2018 61.6 101.4 68.5 47.9 67.1 16.8 17.3 31.4 412.0 Other temporary differences comprise a number of items including tax deductible goodwill, none of which is individually significant to the Group’s consolidated balance sheet. At 31 December 2018 the balance related to temporary differences in relation to revenue adjustments, tax deductible goodwill, fair value adjustments, and other temporary differences. WPP ANNUAL REPORT 2018 143

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2018 and 2017: Brands Property, Other and other Associate plant and Financial temporary intangibles earnings Goodwill equipment instruments differences Total £m £m £m £m £m £m £m 1 January 2017 755.9 28.3 232.5 36.2 64.0 33.1 1,150.0 Acquisition of subsidiaries 21.4 – – – – – 21.4 (Credit)/charge to income (49.9) (6.0) 0.7 (0.5) (3.3) 5.1 (53.9) Impact of US tax reform (203.8) – (76.3) (11.9) (22.2) 18.0 (296.2) Charge to other comprehensive income – – – – – 3.7 3.7 Exchange differences (34.4) (0.7) (16.5) (2.6) (2.3) (3.3) (59.8) 31 December 2017 489.2 21.6 140.4 21.2 36.2 56.6 765.2 Acquisition of subsidiaries 10.7 – – – – – 10.7 (Credit)/charge to income (68.8) (3.9) 31.8 (0.3) (0.9) (20.7) (62.8) Charge to other comprehensive income – – – – – 0.5 0.5 Exchange differences 7.5 (0.1) 10.1 1.3 4.6 1.5 24.9 31 December 2018 438.6 17.6 182.3 22.2 39.9 37.9 738.5 At the balance sheet date, the Group has gross tax losses and other temporary differences of £6,638.6 million (2017: £6,208.6 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £1,763.4 million (2017: £1,539.3 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £4,875.2 million (2017: £4,669.3 million) of losses and other temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £46.4 million (2017: £56.5 million) that will expire within 1–10 years, and £4,572.6 million (2017: £4,421.5 million) of losses that may be carried forward indefinitely. At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have not been recognised was £1,768.5 million (2017: £3,898.0 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers that it is probable that such differences will not reverse in the foreseeable future. 16. TRADE AND OTHER RECEIVABLES The ageing of trade receivables and other financial assets by due date is The following are included in trade and other receivables: as follows: Amounts falling due within one year: 2018 20171 £m £m Trade receivables (net of bad debt provision) 8,062.2 7,889.7 Work in progress 366.5 401.1 VAT and sales taxes recoverable 264.2 202.3 Prepayments 287.3 298.3 Accrued income 3,541.2 3,205.8 Fair value of derivatives 1.3 1.0 Other debtors 578.8 532.5 13,101.5 12,530.7 Note 1 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. Carrying amount Neither at 31 past 181 Greater December due nor 0-30 31-90 91-180 days- than 1 2018 impaired days days days 1 year year 2018 £m £m £m £m £m £m £m Trade receivables 8,062.2 5,873.7 1,370.7 549.1 128.3 75.6 64.8 Other assets ?nancial 551.7 424.9 61.3 14.2 8.6 7.7 35.0 8,613.9 6,298.6 1,432.0 563.3 136.9 83.3 99.8 Past due but not impaired Carrying amount Neither at 31 past 181 Greater December due nor 0-30 31-90 91-180 days- than 1 2017 impaired days days days 1 year year 2017 £m £m £m £m £m £m £m Trade receivables 7,889.7 5,466.6 1,629.6 577.0 143.0 48.8 24.7 Other assets ?nancial 500.4 331.2 107.0 6.6 4.7 10.3 40.6 8,390.1 5,797.8 1,736.6 583.6 147.7 59.1 65.3 Other financial assets are included in other debtors. Past due amounts are not impaired where collection is considered likely. Amounts falling due after more than one year: 2018 2017 £m £m Prepayments 3.0 3.6 Accrued income 16.5 20.5 Fair value of derivatives 8.4 2.1 Other debtors 152.1 150.0 180.0 176.2 144 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The Group has applied the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to performance obligations unsatisfied (or partially unsatisfied) as of the end of the reporting period as contracts typically have an original expected duration of a year or less. Bad debt provisions: 2018 2017 £m £m At beginning of year 91.3 93.8 New acquisitions 1.5 1.2 Charged to the income statement 66.7 27.4 Released to the income statement (11.6) (8.4) Exchange adjustments 2.1 (4.1) Utilisations and other movements (33.4) (18.6) At end of year 116.6 91.3 The allowance for bad and doubtful debts is equivalent to 1.4% (2017: 1.1%) of gross trade accounts receivables. The requirement to use an expected loss method of impairment of financial assets on adoption of IFRS 9 on 1 January 2018 did not have a material impact on the Group. The Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9, and recognises a loss allowance based on the financial asset’s lifetime expected credit loss. Based on the aging of the invoice, the loss allowance at 31 December 2018 and 1 January 2018 (on adoption of IFRS 9) is as follows: 0-90 91-180 181 days- Over days days 1 year 1 year 31 December 2018 £m £m £m £m £m Gross trade receivables 8,178.9 7,621.9 381.5 86.5 89.0 Loss allowance 116.6 11.3 3.8 39.2 62.3 Expected loss rate 1.4% 0.1% 1.0% 45.3% 70.0% 0-90 91-180 181 days- Over days days 1 year 1 year 1 January 2018 £m £m £m £m £m Gross trade receivables 7,981.0 7,392.6 425.6 78.6 84.2 Loss allowance 91.3 2.9 2.8 24.2 61.4 Expected loss rate 1.1% 0.0% 0.7% 30.8% 73.0% Impairment losses on work in progress and accrued income were immaterial for the years presented. The Group considers that the carrying amount of trade and other receivables approximates their fair value. 17. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in trade and other payables falling due within one year: 2018 2017 £m £m Trade payables 10,524.3 9,893.0 Deferred income 1,253.6 1,212.1 Payments due to vendors (earnout agreements) 148.2 180.7 Liabilities vendors in respect of put option agreements with 36.8 38.6 Fair value of derivatives 2.6 3.5 Other creditors and accruals 3,072.9 2,913.2 15,038.4 14,241.1 The Group considers that the carrying amount of trade and other payables approximates their fair value. 18. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR The following are included in trade and other payables falling due after more than one year: 2018 2017 £m £m Payments due to vendors (earnout agreements) 266.5 450.0 Liabilities in respect of put option agreements with vendors 205.2 219.5 Fair value of derivatives 14.2 3.3 Other creditors and accruals 355.5 320.0 841.4 992.8 The Group considers that the carrying amount of trade and other payables approximates their fair value. The following tables set out payments due to vendors, comprising contingent consideration and the Directors’ best estimates of future earnout-related obligations: 2018 2017 £m £m Within one year 148.2 180.7 Between one and two years 140.2 128.3 Between two and three years 38.5 144.1 Between three and four years 50.3 58.3 Between four and ?ve years 20.4 103.1 Over ?ve years 17.1 16.2 414.7 630.7 2018 2017 £m £m At beginning of year 630.7 976.5 Earnouts paid (note 11) (120.2) (199.1) New acquisitions 48.6 163.7 Revision of estimates taken to goodwill (note 12) (68.3) (60.7) Revaluation of payments due to vendors (note 6) (82.6) (208.6) Exchange adjustments 6.5 (41.1) At end of year 414.7 630.7 As of 31 December 2018, the potential undiscounted amount of future payments that could be required under the earnout agreements for acquisitions completed in the current year and for all earnout agreements range from £nil to £179 million (2017: £nil to £228 million) and £nil to £1,960 million (2017: £nil to £1,910 million), respectively. 19. BANK OVERDRAFTS, BONDS AND BANK LOANS Amounts falling due within one year: 2018 2017 £m £m Bank overdrafts 442.0 393.2 Corporate bonds and bank loans 583.1 230.9 1,025.1 624.1 The Group considers that the carrying amount of bank overdrafts approximates their fair value. Amounts falling due after more than one year: 2018 2017 £m £m Corporate bonds and bank loans 5,634.8 6,250.4 The Group estimates that the fair value of corporate bonds is £5,965.7 million at 31 December 2018 (2017: £5,816.5 million). The fair values of the corporate bonds are based on quoted market prices. The Group considers that the carrying amount of bank loans of £186.8 million (2017: £993.4 million) approximates their fair value. WPP ANNUAL REPORT 2018 145

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The corporate bonds, bank loans and overdrafts included within liabilities fall due for repayment as follows: 2018 2017 £m £m Within one year 1,025.1 624.1 Between one and two years 423.8 727.6 Between two and three years 761.0 421.0 Between three and four years 609.8 1,384.2 Between four and ?ve years 670.1 356.6 Over ?ve years 3,170.1 3,361.0 6,659.9 6,874.5 20. PROVISIONS FOR LIABILITIES AND CHARGES The movements in 2018 and 2017 were as follows: Property Other Total £m £m £m 1 January 2017 58.5 169.4 227.9 Charged to the income statement 4.1 16.9 21.0 Acquisitions1 4.0 22.8 26.8 Utilised (6.0) (21.4) (27.4) Released to the income statement (5.5) (5.9) (11.4) Transfers 0.1 7.1 7.2 Exchange adjustments (2.6) (12.5) (15.1) 31 December 2017 52.6 176.4 229.0 Charged to the income statement2 72.1 13.9 86.0 Acquisitions1 0.5 8.3 8.8 Utilised (5.7) (20.1) (25.8) Released to the income statement (5.7) (4.6) (10.3) Transfers 2.0 10.9 12.9 Exchange adjustments 2.9 8.2 11.1 31 December 2018 118.7 193.0 311.7 Notes 1 Acquisitions include £8.4 million (2017: £21.9 million) of provisions arising from revisions to fair value adjustments related to the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. 2 Amounts charged to the income statement in 2018 include £50.6 million in regard to transformation costs with respect to the strategic initiative of co-locations in major cities. The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims will have a material adverse effect on the Group’s financial position or on the results of its operations. 21. SHARE-BASED PAYMENTS Charges for share-based incentive plans were as follows: 2018 2017 2016 £m £m £m Share-based payments (note 5) 84.8 105.0 106.5 Share-based payments comprise charges for stock options and restricted stock awards to employees of the Group. As of 31 December 2018, there was £146.0 million (2017: £156.0 million) of total unrecognised compensation cost related to the Group’s restricted stock plans. That cost is expected to be recognised over an average period of one to two years. Further information on stock options is provided in note 25. RESTRICTED STOCK PLANS The Group operates a number of equity-settled share incentive schemes, in most cases satisfied by the delivery of stock from one of the Group’s ESOP Trusts. The most significant current schemes are as follows: EXECUTIVE PERFORMANCE SHARE PLAN (EPSP) This scheme is intended to reward and incentivise the most senior executives of the Group. The performance period is five complete financial years, commencing with the financial year in which the award is granted. The vest date will usually be in the March following the end of the five-year performance period. Vesting is conditional on continued employment throughout the vesting period. There are three performance criteria, each constituting one-third of the vesting value, and each measured over this five-year period: (i) TSR against a comparator group of companies. Threshold performance (equating to ranking in the 50th percentile of the comparator group) will result in 20% vesting of the part of the award dependent on TSR. The maximum vest of 100% will arise if performance ranks in the 90th percentile, with a sliding scale of vesting for performance between threshold and maximum. (ii) Headline diluted earnings per share. Threshold performance (7% compound annual growth) will again result in a 20% vest. Maximum performance of 14% compound annual growth will give rise to a 100% vest, with a sliding vesting scale for performance between threshold and maximum. (iii) Return on equity (ROE). Average annual ROE defined as headline diluted EPS divided by the balance sheet value per share of shareholders’ equity. Threshold performance ranges between 10–14% average annual ROE and maximum performance ranges between 14–18%, with a sliding scale in between. Threshold again gives rise to a 20% vest, 100% for maximum, with a sliding scale in between. PERFORMANCE SHARE AWARDS (PSA) Grants of restricted stock under PSA are dependent upon annual performance targets, typically based on one or more of: operating profit, profit before taxation and operating margin. Grants are made in the year following the year of performance measurement, and vest two years after grant date provided the individual concerned is continually employed by the Group throughout this time. LEADERS, PARTNERS AND HIGH POTENTIAL GROUP This scheme provides annual grants of restricted stock to approximately 1,800 key executives of the Group. Vesting is conditional on continued employment over the three-year vesting period. VALUATION METHODOLOGY For all of these schemes, the valuation methodology is based upon fair value on grant date, which is determined by the market price on that date or the application of a Black-Scholes model, depending upon the characteristics of the scheme concerned. The assumptions underlying the Black-Scholes model are detailed in note 25, including details of assumed dividend yields. Market price on any given day is obtained from external, publicly available sources. MARKET/NON-MARKET CONDITIONS Most share-based plans are subject to non-market performance conditions, such as margin or growth targets, as well as continued employment. EPSP is subject to a number of performance conditions, including TSR, a market-based condition. For schemes without market-based performance conditions, the valuation methodology above is applied and, at each year-end, the relevant accrual for each grant is revised, if appropriate, to take account of any changes in estimate of the likely number of shares expected to vest. For schemes with market-based performance conditions, the probability of satisfying these conditions is assessed at grant date through a statistical model (such as the Monte Carlo Model) and applied to the fair value. This initial valuation remains fixed throughout the life of the relevant plan, irrespective of the actual outcome in terms of performance. Where a lapse occurs due to cessation of employment, the cumulative charge taken to date is reversed. 146 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Movement on ordinary shares granted for significant restricted stock plans: Non- Non- vested vested 31 1 January December 2018 Granted Lapsed Vested 2018 number number number number number m m m m m Share Executive Plan Performance (EPSP) 9.1 0.7 (1.1) (2.0) 6.7 Awards Performance (PSA) Share 1.9 1.4 (0.1) (0.9) 2.3 Leaders, High Potential Partners Group and 6.8 4.8 (0.7) (1.8) 9.1 Weighted average fair value (pence per share): Executive Share Plan Performance (EPSP) 1,368p 814p 1,500p 1,122p 1,363p Awards Performance (PSA) Share 1,659p 1,202p 1,522p 1,517p 1,437p High Leaders, Potential Partners Group and 1,502p 806p 1,472p 1,426p 1,154p The total fair value of shares vested for all the Group’s restricted stock plans during the year ended 31 December 2018 was £107.2 million (2017: £114.8 million, 2016: £116.8 million). 22. PROVISION FOR POST-EMPLOYMENT BENEFITS Companies within the Group operate a large number of pension plans, the forms and benefits of which vary with conditions and practices in the countries concerned. The Group’s pension costs are analysed as follows: 2018 2017 2016 £m £m £m De?ned contribution plans 172.3 175.9 153.5 De?ned bene?t plans charge to operating pro?t 18.9 16.1 24.6 Pension costs (note 5) 191.2 192.0 178.1 Net interest expense on pension plans (note 6) 4.4 6.3 6.7 195.6 198.3 184.8 DEFINED BENEFIT PLANS The pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various pension plans were carried out at various dates in the last three years. These valuations have been updated by the local actuaries to 31 December 2018. The Group’s policy is to close existing defined benefit plans to new members. This has been implemented across a significant number of the pension plans. Contributions to funded plans are determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2018 amounted to £44.9 million (2017: £68.2 million, 2016: £43.7 million). Employer contributions and benefit payments in 2019 are expected to be approximately £50 million. (A) ASSUMPTIONS There are a number of areas in pension accounting that involve estimates made by management based on advice of qualified advisors. These include establishing the discount rates, rates of increase in salaries and pensions in payment, inflation, and mortality assumptions. The main weighted average assumptions used for the actuarial valuations at 31 December are shown in the following table: 2018 2017 2016 2015 % pa % pa % pa % pa UK Discount rate1 2.8 2.4 2.5 3.7 Rate of increase in salaries2 n/a n/a 3.5 3.1 Rate of increase in pensions in payment 4.3 4.1 4.1 3.9 In?ation 2.8 2.7 2.8 2.4 North America Discount rate1 4.1 3.5 3.8 4.0 Rate of increase in salaries 3.0 3.1 3.1 3.0 In?ation n/a 4.0 4.0 2.5 Western Continental Europe Discount rate1 2.0 1.9 1.7 2.5 Rate of increase in salaries 2.3 1.9 2.0 2.3 Rate of increase in pensions in payment 1.2 1.2 1.3 1.6 In?ation 1.7 1.7 1.7 2.0 Asia Middle Paci?c, East and Latin Central America, & Eastern Africa & Europe Discount rate1 5.0 4.2 4.2 4.2 Rate of increase in salaries 5.8 5.5 5.9 5.8 In?ation 3.6 4.0 4.0 4.0 Notes 1 Discount rates are based on high-quality corporate bond yields. In countries where there is no deep market in corporate bonds, the discount rate assumption has been set with regard to the yield on long-term government bonds. 2 The salary assumptions are no longer applicable to the UK as all plans were frozen since 2017. Active participants will not accrue additional bene?ts for future services under these plans. For the Group’s pension plans, the plans’ assets are invested with the objective of being able to meet current and future benefit payment needs, while controlling balance sheet volatility and future contributions. Pension plan assets are invested with a number of investment managers, and assets are diversified among equities, bonds, insured annuities, property and cash or other liquid investments. The primary use of bonds as an investment class is to match the anticipated cash flows from the plans to pay pensions. The Group is invested in high-quality corporate and government bonds which share similar risk characteristics and are of equivalent currency and term to the plan liabilities. Various insurance policies have also been bought historically to provide a more exact match for the cash flows, including a match for the actual mortality of specific plan members. These insurance policies effectively provide protection against both investment fluctuations and longevity risks. The strategic target allocation varies among the individual plans. Management considers the types of investment classes in which the pension plan assets are invested. The types of investment classes are determined by economic and market conditions and in consideration of specific asset class risk. Management periodically commissions detailed asset and liability studies performed by third-party professional investment advisors and actuaries that generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into various investment categories. WPP ANNUAL REPORT 2018 147

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 December 2018, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows: Western All North Continental Years life expectancy after age 65 plans America UK Europe Other1 – (at current age 65) pensioners – male 22.2 22.1 23.2 21.1 17.0 – (at current age 65) pensioners – female 23.9 23.6 24.3 24.0 21.4 – (current future pensioners age 45) – male 24.0 23.7 24.8 23.5 17.0 – future (current pensioners age 45) – female 25.7 25.2 26.1 26.2 21.4 Note 1 Includes Asia Paci?c, Latin America, Africa & Middle East and Central & Eastern Europe. The life expectancies after age 65 at 31 December 2017 were 22.4 years and 24.0 years for male and female current pensioners (at age 65), respectively, and 23.8 years and 25.7 years for male and female future pensioners (current age 45), respectively. In the determination of mortality assumptions, management uses the most up-to-date mortality tables available in each country. The following table provides information on the weighted average duration of the defined benefit pension obligations and the distribution of the timing of benefit payments for the next 10 years. The duration corresponds to the weighted average length of the underlying cash flows. Western All North Continental plans America UK Europe Other1 de?ned Weighted bene?t average obligation duration (years) of the 11.8 8.5 14.2 15.7 8.2 the Expected next 10 benefit years (payments £m) over Bene?ts 12 months expected to be paid within 67.2 36.3 16.4 9.3 5.1 Bene?ts 2020 expected to be paid in 58.4 34.3 12.9 8.6 2.5 Bene?ts expected to be paid in 2021 58.3 33.7 12.8 8.6 3.1 Bene?ts 2022 expected to be paid in 59.1 33.6 12.7 9.1 3.6 Bene?ts 2023 expected to be paid in 56.6 30.4 12.9 9.4 3.9 next Bene?ts ?ve expected years to be paid in the 276.6 131.0 66.1 52.8 26.6 Note 1 Includes Asia Paci?c, Latin America, Africa & Middle East and Central & Eastern Europe. The following table presents a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at the balance sheet date. This sensitivity analysis applies to the defined benefit obligation only and not to the net defined benefit pension liability in its entirety, the measurement of which is driven by a number of factors including, in addition to the assumptions below, the fair value of plan assets. The sensitivity analyses are based on a change in one assumption while holding all other assumptions constant so that interdependencies between the assumptions are excluded. The methodology applied is consistent with that used to determine the recognised defined benefit obligation. The sensitivity analysis for inflation is not shown as it is an underlying assumption to build the pension and salary increase assumptions. Changing the inflation assumption on its own without changing the salary or pension assumptions will not result in a significant change in pension liabilities. Increase/(decrease) in bene?t obligation 2018 2017 Sensitivity analysis of significant actuarial assumptions £m £m Discount rate Increase by 25 basis points UK (9.8) (13.1) North America (8.8) (9.9) Western Continental Europe (8.7) (9.2) Other1 (0.7) (0.6) Decrease by 25 basis points UK 10.3 13.8 North America 9.1 10.2 Western Continental Europe 9.3 9.8 Other1 0.7 0.6 Rate of increase in salaries Increase by 25 basis points North America – 0.1 Western Continental Europe 1.3 1.5 Other1 0.7 0.6 Decrease by 25 basis points North America – (0.1) Western Continental Europe (1.2) (1.5) Other1 (0.6) (0.6) Rate of increase in pensions in payment Increase by 25 basis points UK 1.3 2.4 Western Continental Europe 5.3 6.2 Decrease by 25 basis points UK (0.8) (1.9) Western Continental Europe (5.0) (5.8) Life expectancy Increase in longevity by one additional year UK 13.6 16.9 North America 5.7 6.0 Western Continental Europe 6.9 7.0 Note 1 Includes Asia Paci?c, Latin America, Africa & Middle East and Central & Eastern Europe. (B) ASSETS AND LIABILITIES At 31 December, the fair value of the assets in the pension plans, and the assessed present value of the liabilities in the pension plans are shown in the following table: 2018 2017 2016 £m % £m % £m % Equities 76.5 9.1 124.6 13.4 161.9 17.3 Bonds 544.9 64.8 520.0 55.9 566.0 60.6 Insured annuities 90.9 10.8 178.5 19.2 63.5 6.8 Property 0.9 0.1 1.3 0.1 1.6 0.2 Cash 31.1 3.7 9.9 1.1 44.9 4.8 Other 96.3 11.5 95.7 10.3 96.3 10.3 Total fair value of assets 840.6 100.0 930.0 100.0 934.2 100.0 Present value of liabilities (1,024.0) (1,135.4) (1,209.8) De?cit in the plans (183.4) (205.4) (275.6) Irrecoverable surplus (0.9) (0.9) (0.9) Net liability1 (184.3) (206.3) (276.5) Plans in surplus 42.8 43.9 28.0 Plans in de?cit (227.1) (250.2) (304.5) Note 1 The related deferred tax asset is discussed in note 15. All plan assets have quoted prices in active markets with the exception of insured annuities and other assets. 148 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2018 2017 2016 Surplus/(deficit) in plans by region £m £m £m UK 33.7 31.5 20.0 North America (68.7) (89.2) (133.8) Western Continental Europe (104.6) (107.7) (116.9) Central Asia Paci?c, & Eastern Latin America, Europe Africa & Middle East and (43.8) (40.0) (44.9) De?cit in the plans (183.4) (205.4) (275.6) Some of the Group’s defined benefit plans are unfunded (or largely unfunded) by common custom and practice in certain jurisdictions. In the case of these unfunded plans, the benefit payments are made as and when they fall due. Pre-funding of these plans would not be typical business practice. The following table shows the split of the deficit at 31 December between funded and unfunded pension plans. 2018 2017 2016 2018 Present 2017 Present 2016 Present Surplus/ value of Surplus/ value of Surplus/ value of (de?cit) liabilities (de?cit) liabilities (de?cit) liabilities £m £m £m £m £m £m Funded plans by region UK 33.7 (290.5) 31.5 (387.5) 20.0 (406.4) North America (4.6) (375.3) (21.4) (385.4) (56.0) (420.4) Western Europe Continental (35.8) (168.4) (37.9) (173.3) (48.9) (180.9) Asia America, Paci?c, Africa Latin & & Middle Eastern East Europe and Central (6.6) (19.7) (4.2) (15.8) (5.8) (17.2) funded De?cit/liabilities plans in the (13.3) (853.9) (32.0) (962.0) (90.7) (1,024.9) Unfunded region plans by UK – – – – – –North America (64.1) (64.1) (67.8) (67.8) (77.8) (77.8) Western Europe Continental (68.8) (68.8) (69.8) (69.8) (68.0) (68.0) Asia America, Paci?c, Africa Latin & & Middle Eastern East Europe and Central (37.2) (37.2) (35.8) (35.8) (39.1) (39.1) unfunded De?cit/liabilities plans in the (170.1) (170.1) (173.4) (173.4) (184.9) (184.9) the De?cit/liabilities plans in (183.4) (1,024.0) (205.4) (1,135.4) (275.6) (1,209.8) In accordance with IAS 19, plans that are wholly or partially funded are considered funded plans. (C) PENSION EXPENSE The following table shows the breakdown of the pension expense between amounts charged to operating profit, amounts charged to finance costs and amounts recognised in the consolidated statement of comprehensive income (OCI): 2018 2017 2016 £m £m £m Service cost1 15.5 13.0 22.4 Administrative expenses 3.4 3.1 2.2 Charge to operating pro?t 18.9 16.1 24.6 Net interest expense on pension plans 4.4 6.3 6.7 Charge bene?t plans to pro?t before taxation for de?ned 23.3 22.4 31.3 Return on plan assets (excluding interest income) (43.9) 13.4 66.3 the Changes present in demographic value of the plan assumptions liabilities underlying 3.8 12.7 6.7 present Changes value in ?nancial of the assumptions plan liabilities underlying the 45.2 (17.0) (92.6) Experience gain arising on the plan liabilities 3.8 7.9 1.0 Change in irrecoverable surplus – – 2.7 Actuarial gain/(loss) recognised in OCI 8.9 17.0 (15.9) Note 1 Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments. (D) MOVEMENT IN PLAN LIABILITIES The following table shows an analysis of the movement in the pension plan liabilities for each accounting period: 2018 2017 2016 £m £m £m Plan liabilities at beginning of year 1,135.4 1,209.8 1,039.9 Service cost1 15.5 13.0 22.4 Interest cost 30.7 32.9 37.2 Actuarial (gain)/loss Effect of changes in demographic assumptions (3.8) (12.7) (6.7) Effect of changes in ?nancial assumptions (45.2) 17.0 92.6 Effect of experience adjustments (3.8) (7.9) (1.0) Bene?ts paid (75.6) (79.7) (92.4) Loss/(gain) due to exchange rate movements 30.0 (36.4) 124.2 Settlement payments2 (70.4) (1.2) (4.8) Other3 11.2 0.6 (1.6) Plan liabilities at end of year 1,024.0 1,135.4 1,209.8 Notes 1 Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments. 2 In 2018, the Group completed the transfer of the de?ned bene?t obligations for certain UK plans to an insurer resulting in £70.4 million settlement payments. 3 Other includes acquisitions, disposals, plan participants’ contributions and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the ?rst time in the periods presented. (E) MOVEMENT IN PLAN ASSETS The following table shows an analysis of the movement in the pension plan assets for each accounting period: 2018 2017 2016 £m £m £m Fair value of plan assets at beginning of year 930.0 934.2 814.2 Interest income on plan assets 26.3 26.6 30.5 Return on plan assets (excluding interest income) (43.9) 13.4 66.3 Employer contributions 44.9 68.2 43.7 Bene?ts paid (75.6) (79.7) (92.4) Gain/(loss) due to exchange rate movements 23.0 (28.7) 78.8 Settlement payments1 (70.4) (1.2) (4.8) Administrative expenses (3.4) (3.1) (2.2) Other2 9.7 0.3 0.1 Fair value of plan assets at end of year 840.6 930.0 934.2 Actual return on plan assets (17.6) 40.0 96.8 Notes 1 In 2018, the Group completed the transfer of the de?ned bene?t obligations for certain UK plans to an insurer resulting in £70.4 million settlement payments. 2 Other includes acquisitions, disposals, plan participants’ contributions and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the ?rst time in the periods presented. 23. RISK MANAGEMENT POLICIES
FOREIGN CURRENCY RISK The Group’s results in pounds sterling are subject to fluctuation as a result of exchange rate movements. The Group does not hedge this translation exposure to its earnings but does hedge the currency element of its net assets using foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts. The Group effects these currency net asset hedges by borrowing in the same currencies as the operating (or ‘functional’) currencies of its main operating units. The majority of the Group’s debt is therefore denominated in US dollars, pounds sterling and euros. The Group’s borrowings at 31 December 2018 were primarily made up of $2,784 million, £1,044 million and €3,200 million (2017: $3,931 million, £600 million and €3,202 million). The Group’s average gross debt during the course of 2018 was $3,377 million, £1,039 million and €3,202 million (2017: $3,741 million, £1,242 million and €3,108 million). The Group’s operations conduct the majority of their activities in their own local currency and consequently the Group has no significant transactional foreign exchange exposures arising from its operations. Any significant cross-border trading exposures are hedged by the use of forward foreign-exchange contracts. No speculative foreign exchange trading is undertaken. WPP ANNUAL REPORT 2018 149

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INTEREST RATE RISK GOING CONCERN AND LIQUIDITY RISK The Group is exposed to interest rate risk on both interest-bearing assets and In considering going concern and liquidity risk, the Directors have reviewed interest-bearing liabilities. The Group has a policy of actively managing its the Group’s future cash requirements and earnings projections. The Directors interest rate risk exposure while recognising that fixing rates on all its debt believe these forecasts have been prepared on a prudent basis and have also eliminates the possibility of benefiting from rate reductions and similarly, considered the impact of a range of potential changes to trading performance. having all its debt at floating rates unduly exposes the Group to increases in The Directors have concluded that the Group should be able to operate within rates. its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial Including the effect of interest rate and cross-currency swaps, 52.9% of the statements of the Group on a going concern basis. The potential impact of year-end US dollar debt is at fixed rates averaging 4.58% for an average period Brexit has been considered and is not deemed to have a significant effect on of 181 months; 47.1% of the year-end US dollar debt is at floating rates this assessment. averaging 4.77% for an average period of 39 months; 100% of the sterling debt is at a fixed rate of 3.43% for an average period of 232 months; 84.4% of the At 31 December 2018, the Group has access to £8.4 billion of committed euro debt is at fixed rates averaging 1.99% for an average period of 75 months facilities with maturity dates spread over the years 2019 to 2046 as illustrated and 15.6% of the euro debt is at floating rates averaging 0.05% for an average below: of 28 months. 2019 2020 2021 2022 2023+ £m £m £m £m £m £ bonds £400m (2.875% ‘46) 400.0 400.0 US bond $450m (5.625% ‘43) 353.3 353.3 US bond $272m (5.125% ’42) 213.1 213.1 Eurobonds €600m (1.625% ’30) 539.1 539.1 Eurobonds €750m (2.25%,’26) 673.9 673.9 Eurobonds €500m (1.375% ’25) 449.2 449.2 US bond $750m (3.75%,’24) 588.4 588.4 Eurobonds €750m (3.0% ’23) 673.9 673.9 US bond $500m (3.625% ’22) 392.3 392.3 Eurobonds €250m (3m EURIBOR + 0.45% ’22) 224.6 224.6 US bond $812m (4.75% ’21) 637.4 637.4 Bank revolver ($2,500m ‘21) 1,961.4 1,961.4 Bank revolver (A$150m ‘19, A$370m ‘21) 287.3 82.9 204.4 £ bonds £200m (6.375% ’20) 200.0 200.0 Eurobonds €250m (3m EURIBOR + 0.32% ’20) 224.6 224.6 Eurobonds €600m (0.75% ’19) 539.1 539.1 Total committed facilities available 8,357.6 622.0 424.6 2,803.2 616.9 3,890.9 Drawn down facilities at 31 December 2018 6,282.9 571.1 424.6 779.4 616.9 3,890.9 Undrawn committed credit facilities 2,074.7 Drawn down facilities at 31 December 2018 6,282.9 Cash and cash equivalents at 31 December 2018 (2,201.2) Other adjustments (65.0) Net debt at 31 December 2018 4,016.7 Given the strong cash generation of the business, its debt maturity profile and CREDIT RISK available facilities, the Directors believe the Group has sufficient liquidity to The Group’s principal financial assets are cash and short-term deposits, trade match its requirements for the foreseeable future. and other receivables and investments, the carrying values of which represent the Group’s maximum exposure to credit risk in relation to financial assets, as TREASURY ACTIVITIES shown in note 24. Treasury activity is managed centrally from London, New York and Hong Kong, and is principally concerned with the monitoring of working capital, managing The Group’s credit risk is primarily attributable to its trade receivables. The external and internal funding requirements and the monitoring and majority of the Group’s trade receivables are due from large national or management of financial market risks, in particular interest rate and foreign multinational companies where the risk of default is considered low. The exchange exposures. amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on The treasury operation is not a profit centre and its activities are carried out in expected losses, prior experience and their assessment of the current accordance with policies approved by the Board of Directors and subject to economic environment. A relatively small number of clients make up a regular review and audit. significant percentage of the Group’s debtors, but no single client represents more than 5% of total trade receivables as at 31 December 2018. The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing The credit risk on liquid funds and derivative financial instruments is limited facilities are maintained in excess of peak net-borrowing levels and debt because the counterparties are banks with high credit ratings assigned by maturities are closely monitored. Targets for average net debt are set on an international credit-rating agencies or banks that have been financed by annual basis and, to assist in meeting this, working capital targets are set for their government. all the Group’s major operations. A relatively small number of clients contribute a significant percentage of CAPITAL RISK MANAGEMENT the Group’s consolidated revenues. The Group’s clients generally are able to The Group manages its capital to ensure that entities in the Group will be able reduce advertising and marketing spending or cancel projects at any time to continue as a going concern while maximising the return to stakeholders for any reason. There can be no assurance that any of the Group’s clients will through the optimisation of the debt and equity balance. The capital structure continue to utilise the Group’s services to the same extent, or at all, in the of the Group consists of debt, which includes the borrowings disclosed in note future. Clients can reduce their marketing spend, terminate contracts, or 10, cash and cash equivalents and equity attributable to equity holders of the cancel projects on short notice. The loss of one or more of our largest clients, parent, comprising issued capital, reserves and retained earnings as disclosed if not replaced by new accounts or an increase in business from existing in the consolidated statement of changes in equity and in notes 25 and 26. clients, would adversely affect our financial condition. 150 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS SENSITIVITY ANALYSIS The following sensitivity analysis addresses the effect of currency and interest rate risks on the Group’s financial instruments. The analysis assumes that all hedges are highly effective. CURRENCY RISK At 31 December 2018, the Group’s major foreign currency denominated borrowings are held in individual entities with the same financial reporting currencies as borrowings. Therefore a weakening or strengthening of sterling against the Group’s major currencies would not result in any gains or losses being posted directly to equity and there would be no profit before tax impact. INTEREST RATE RISK A one percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2018 would increase profit before tax by approximately £7.2 million (2017: £0.2 million). A one percentage decrease in market interest rates would have an equal and opposite effect. This has been calculated by applying the interest rate change to the Group’s variable rate cash and borrowings. 24. FINANCIAL INSTRUMENTS CURRENCY DERIVATIVES The Group utilises currency derivatives to hedge significant future transactions and cash flows and the exchange risk arising on translation of the Group’s investments in foreign operations. The Group is a party to a variety of foreign currency derivatives in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the Group’s principal markets. The Group designates its foreign currency-denominated debt as hedging instruments against the currency risk associated with the translation of its foreign operations. Contracts due in March 2025 have receipts of €500.0 million and payments of £444.1 million. At 31 December 2018, the fair value of the Group’s currency derivatives is estimated to be a net asset of approximately £8.4 million (2017: £nil). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £8.4 million (2017: £nil) assets included in trade and other receivables and £nil (2017: £nil) liabilities included in trade and other payables. The amounts taken to and deferred in equity during the year for currency derivatives that are designated and effective hedges was a charge of £17.9 million (2017: £nil) for cash flow hedges. Changes in the fair value relating to the ineffective portion of the currency derivatives amounted to a loss of £11.1 million (2017: £nil) which is included in the revaluation of financial instruments for the year. This loss resulted from a £6.8 million gain on hedging instruments and a £17.9 million loss on hedged items. At the balance sheet date, the total nominal amount of outstanding forward foreign exchange contracts not designated as hedges was £296.1 million (2017: £177.7 million). The Group estimates the fair value of these contracts to be a net liability of £1.3 million (2017: £2.5 million). These arrangements are designed to address significant exchange exposure and are renewed on a revolving basis as required. INTEREST RATE SWAPS The Group uses interest rate swaps as hedging instruments in fair value hedges to manage its exposure to interest rate movements on its borrowings. Contracts with a nominal value of $500 million have fixed interest receipts of 3.63% until September 2022 and have floating interest payments averaging LIBOR plus 1.52%. Contracts with a nominal value of $812 million have fixed interest receipts of 4.75% until November 2021 and have floating rate payments averaging LIBOR plus 2.34%. The fair value of interest rate swaps entered into at 31 December 2018 is estimated to be a net liability of £14.2 million (2017: £1.2 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £nil (2017: £2.1 million) assets included in trade and other receivables and £14.2 million (2017: £3.3 million) liabilities included in trade and other payables. Changes in the fair value relating to the ineffective portion of interest rate swaps amounted to a gain of £0.9 million (2017: £2.8 million) which is included in the revaluation of financial instruments for the year. This gain resulted from a £9.9 million loss on hedging instruments and a £10.8 million gain on hedged items. WPP ANNUAL REPORT 2018 151

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS An analysis of the Group’s financial assets and liabilities by accounting classification is set out below: Derivatives in Held at fair designated Held at fair value through hedge value through other Amortised Carrying relationships pro?t or loss comprehen- cost value Classification under IFRS 9 £m £m sive income £m £m 2018 Other investments – 319.6 347.1 – 666.7 Cash and short-term deposits – – – 2,643.2 2,643.2 Bank overdrafts, bonds and bank loans – – – (1,025.1) (1,025.1) Bonds and bank loans – – – (5,634.8) (5,634.8) Trade and other receivables: amounts falling due within one year – – – 8,545.6 8,545.6 Trade and other receivables: amounts falling due after more than one year – – – 68.3 68.3 Trade and other payables: amounts falling due within one year – – – (10,637.3) (10,637.3) Trade and other payables: amounts falling due after more than one year – – – (8.4) (8.4) Derivative assets 8.4 1.3 – – 9.7 Derivative liabilities (14.2) (2.6) – – (16.8) Payments due to vendors (earnout agreements) (note 18) – (414.7) – – (414.7) Liabilities in respect of put options – (242.0) – – (242.0) (5.8) (338.4) 347.1 (6,048.5) (6,045.6) Derivatives in designated hedge Held for Loans and Available Amortised Carrying relationships trading receivables for sale cost value Classification under IAS 39 £m £m £m £m £m £m 2017 Other investments – – – 1,153.5 – 1,153.5 Cash and short-term deposits – – 2,391.4 – – 2,391.4 Bank overdrafts, bonds and bank loans – – – – (624.1) (624.1) Bonds and bank loans – – – – (6,250.4) (6,250.4) Trade and other receivables: amounts falling due within one year – – 8,328.4 – – 8,328.4 Trade and other receivables: amounts falling due after more than one year – – 61.7 – – 61.7 Trade and other payables: amounts falling due within one year – – – – (9,970.5) (9,970.5) Trade and other payables: amounts falling due after more than one year – – – – (8.5) (8.5) Derivative assets 2.1 1.0 – – – 3.1 Derivative liabilities (3.3) (3.5) – – – (6.8) Payments due to vendors (earnout agreements) (note 18) – (630.7) – – – (630.7) Liabilities in respect of put options – (258.1) – – – (258.1) (1.2) (891.3) 10,781.5 1,153.5 (16,853.5) (5,811.0) The Group adopted IFRS 9 on 1 January 2018 resulting in cash and short-term deposits and trade and other receivables being reclassified from loans and receivables to amortised cost. Other investments of £1,153.5 million classified as available for sale at 31 December 2017 were reclassified as held at fair value through other comprehensive income (£835.1 million) and fair value through profit or loss (£318.4 million). There have been no material changes in the carrying amounts of financial assets and financial liabilities arising from the adoption of IFRS 9. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices); Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 152 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Level 1 Level 2 Level 3 PAYMENTS DUE TO VENDORS AND LIABILITIES IN RESPECT £m £m £m OF PUT OPTIONS 2018 Future anticipated payments due to vendors in respect of contingent Derivatives in designated hedge relationships consideration (earnout agreements) are recorded at fair value, which is the Derivative assets – 8.4 – present value of the expected cash outflows of the obligations. Liabilities in Derivative liabilities – (14.2) – respect of put option agreements are initially recorded at the present value of Held at fair value through pro?t or loss the redemption amount in accordance with IAS 32 and subsequently measured Other investments 0.4 – 319.2 at fair value in accordance with IFRS 9. Both types of obligations are Derivative assets – 1.3 – dependent on the future financial performance of the entity and it is assumed Derivative liabilities – (2.6) – that future profits are in line with Directors’ estimates. The Directors derive Payments due to vendors (earnout agreements) their estimates from internal business plans together with financial due (note 18) – – (414.7) diligence performed in connection with the acquisition. At 31 December 2018, Liabilities in respect of put options – – (242.0) the weighted average growth rate in estimating future financial performance Held at fair value through other was 22.7% (2017: 25.0%), which reflects the prevalence of recent acquisitions in comprehensive income the faster-growing markets and new media sectors. The risk adjusted discount Other investments 128.1 – 219.0 rate applied to these obligations at 31 December 2018 was 2.9% (2017: 1.8%). Level 1 Level 2 Level 3 A one percentage point increase or decrease in the growth rate in estimated £m £m £m future financial performance would increase or decrease the combined 2017 liabilities due to earnout agreements and put options by approximately Derivatives in designated hedge relationships £6.8 million (2017: £8.9 million) and £10.4 million (2017: £9.3 million), Derivative assets – 2.1 – respectively. A 0.5 percentage point increase or decrease in the risk adjusted Derivative liabilities – (3.3) – discount rate would decrease or increase the combined liabilities by Held for trading approximately £7.1 million (2017: £11.2 million) and £7.2 million (2017: £11.4 million), respectively. An increase in the liability would result in a loss in the Derivative assets – 1.0 –revaluation of financial instruments, while a decrease would result in a gain. Derivative liabilities – (3.5) –Payments (note 18) due to vendors (earnout agreements) – – (630.7) OTHER INVESTMENTS The fair value of other investments included in level 1 are based on quoted Liabilities in respect of put options – – (258.1) market prices. Other investments included in level 3 are unlisted securities, Available for sale where market value is not readily available. The Group has estimated relevant Other investments 333.2 – 820.3 fair values on the basis of publicly available information from outside sources. The sensitivity to changes in unobservable inputs is specific to each individual There have been no transfers between these levels in the periods presented investment. Reconciliation of level 3 fair value measurements1: 25. AUTHORISED AND ISSUED SHARE CAPITAL Liabilities in respect of Other Equity Nominal put options investments ordinary value £m £m shares £m 1 January 2017 (297.0) 881.0 Authorised Gains/(losses) recognised in the income statement 52.5 (13.8) 1 January 2017 1,750,000,000 175.0 Gains recognised in other comprehensive income – 15.1 31 December 2017 1,750,000,000 175.0 Exchange adjustments 7.5 (70.9) 31 December 2018 1,750,000,000 175.0 Additions (40.5) 67.7 Disposals – (1.7) Issued and fully paid Cancellations 2.9 – 1 January 2017 1,331,880,730 133.2 Reclassi?cations from other investments to interests in Exercise of share options 630,822 0.1 associates – (57.1) 31 December 2017 1,332,511,552 133.3 Settlements 16.5 – Exercise of share options 166,675 – 31 December 2017 (258.1) 820.3 31 December 2018 1,332,678,227 133.3 Gains recognised in the income statement 34.5 61.1 COMPANY’S OWN SHARES Losses recognised in other comprehensive income – (140.6) The Company’s holdings of own shares are stated at cost and represent shares Exchange adjustments 1.1 – held in treasury and purchases by the Employee Share Ownership Plan (‘ESOP’) Additions (43.5) 35.0 Disposals – (237.3) trusts of shares in WPP plc for the purpose of funding certain of the Group’s share-based incentive plans, details of which are disclosed in the Cancellations 2.2 –Compensation Committee report on pages 104-119. Reclassi?cations associates from other investments to interests in – (0.3) Settlements 21.8 – The trustees of the ESOP purchase the Company’s ordinary shares in the open market using funds provided by the Company. The Company also has an 31 December 2018 (242.0) 538.2 obligation to make regular contributions to the ESOP to enable it to meet its Note administrative costs. The number and market value of the ordinary shares of 1 The reconciliation of payments due to vendors (earnout agreements) is presented in note 18. the Company held by the ESOP at 31 December 2018 was 14,820,994 (2017: 14,232,910), and £125.5 million (2017: £190.9 million) respectively. The number The fair values of financial assets and liabilities are based on quoted market and market value of ordinary shares held in treasury at 31 December 2018 was prices where available. Where the market value is not available, the Group has 70,854,553 (2017: 62,578,938) and £599.9 million (2017: £839.2 million) estimated relevant fair values on the basis of publicly available information respectively. from outside sources. There have been no movements between level 3 and other levels. WPP ANNUAL REPORT 2018 153

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SHARE OPTIONS WPP SHARE OPTION PLAN 2015 As at 31 December 2018, unexercised options over ordinary shares of 12,257,750 WPP EXECUTIVE SHARE OPTION SCHEME and unexercised options over ADRs of 1,286,670 have been granted under the As at 31 December 2018, unexercised options over ordinary shares of 6,741 have WPP Share Option Plan 2015 as follows: been granted under the WPP Executive Share Option Scheme as follows: Number of ordinary Exercise price Exercise Number of ordinary Exercise price Exercise shares under option per share (£) dates shares under option per share (£) dates 23,750 8.372 2021–2025 3,696 8.333 2015 – 2022 4,053,925 8.372 2021–2028 3,045 10.595 2016 – 2023 23,875 13.085 2020–2024 3,245,325 13.085 2020–2027 WPP WORLDWIDE SHARE OWNERSHIP PROGRAMME 66,125 15.150 2018–2022 As at 31 December 2018, unexercised options over ordinary shares of 3,187,979 2,211,900 15.150 2018–2025 and unexercised options over ADRs of 466,559 have been granted under the 5,750 15.150 2019–2025 WPP Worldwide Share Ownership Programme as follows: 15,875 17.055 2019–2023 2,611,225 17.055 2019–2026 Number of ordinary Exercise price Exercise shares under option per share (£) dates 28,275 5.483 2012–2019 Number of ADRs Exercise price Exercise under option per ADR ($) dates 18,000 5.483 2013–2019 439,205 53.140 2021–2028 750 5.608 2012–2019 340,225 88.260 2020–2027 95,000 6.268 2014–2021 282,115 105.490 2020–2026 44,125 6.268 2015–2021 225,125 115.940 2018–2025 61,625 7.113 2013–2020 30,250 7.113 2014–2020 233,129 8.458 2015–2022 52,000 13.145 2017–2021 1,959,975 13.145 2017–2024 4,750 13.145 2018–2024 642,975 13.505 2016–2023 17,125 13.505 2017–2023 Number of ADRs Exercise price Exercise under option per ADR ($) dates 11,855 44.560 2012–2019 29,025 49.230 2014–2021 19,200 56.560 2013–2020 44,964 67.490 2015–2022 195,890 102.670 2017–2024 165,625 110.760 2016–2023 The aggregate status of the WPP Share Option Plans during 2018 was as follows: Movements on options granted (represented in ordinary shares) Outstanding Exercisable 1 January 31 December 31 December 2018 Granted Exercised Lapsed 2018 2018 WPP 6,741 – – – 6,741 6,741 WWOP 6,375,750 – (166,675) (688,301) 5,520,774 5,520,774 WSOP 14,602,950 6,301,400 – (2,213,250) 18,691,100 3,403,650 20,985,441 6,301,400 (166,675) (2,901,551) 24,218,615 8,931,165 Weighted-average exercise price for options over Outstanding Exercisable 1 January 31 December 31 December 2018 Granted Exercised Lapsed 2018 2018 Ordinary shares (£) WPP 9.355 – – – 9.355 9.355 WWOP 12.195 – 7.064 12.473 12.290 12.290 WSOP 14.929 8.372 – 14.818 12.753 15.150 ADRs ($) WWOP 94.752 – 57.031 99.731 95.453 95.453 WSOP 101.047 53.140 – 98.978 84.893 115.940 154 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OPTIONS OVER ORDINARY SHARES Expected volatility is sourced from external market data and represents the Outstanding historic volatility in the Group’s share price over a period equivalent to the expected option life. Range of Weighted average Weighted average exercise prices exercise price contractual life Expected life is based on a review of historic exercise behaviour in the context £ £ Months of the contractual terms of the options, as described in more detail below. 5.483 – 17.055 12.656 96 OPTIONS OVER ADRs TERMS OF SHARE OPTION PLANS Outstanding In 2015, the Group introduced the Share Option Plan 2015 to replace both the ‘all-employee’ Worldwide Share Ownership Plan and the discretionary Range of Weighted average Weighted average Executive Stock Option Plan. Two kinds of options over ordinary shares can exercise prices exercise price contractual life be granted, both with a market value exercise price. Firstly, options can be $ $ Months granted to employees who have worked at a company owned by WPP plc for 44.560 – 115.940 87.703 93 at least two years which are not subject to performance conditions. Secondly, options may be granted on a discretionary basis subject to the satisfaction of As at 31 December 2018 there was £8.5 million (2017: £9.0 million) of total performance conditions. unrecognised compensation costs related to share options. That cost is expected to be recognised over a weighted average period of 20 months The Worldwide Share Ownership Programme was open for participation to (2017: 20 months). employees with at least two years’ employment in the Group. It was not available to those participating in other share-based incentive programmes or Share options are satisfied out of newly issued shares. to Executive Directors. The vesting period for each grant is three years and there are no performance conditions other than continued employment with The weighted average fair value of options granted in the year calculated the Group. using the Black-Scholes model was as follows: The Executive Stock Option Plan has historically been open for participation 2018 2017 2016 to WPP Group Leaders, Partners and High Potential Group. It is not currently Fair value of UK options (shares) 107.0p 112.0p 135.0p offered to Parent Company Executive Directors. The vesting period is three Fair value of US options (ADRs) $8.09 $9.40 $9.94 years and performance conditions include achievement of various TSR (Total Weighted average assumptions: Shareholder Return) and EPS (Earnings Per Share) objectives, as well as UK Risk-free interest rate 0.78% 0.57% 0.44% continued employment. The terms of these stock options are such that if, after US Risk-free interest rate 2.74% 2.05% 1.60% nine years and eight months, the performance conditions have not been met, Expected life (months) 48 48 48 then the stock option will vest automatically. Expected volatility 24% 17% 16% Dividend yield 3.5% 2.9% 2.8% The Group grants stock options with a life of 10 years, including the vesting Options are issued at an exercise price equal to market value on the date period. of grant. The average share price of the Group for the year ended 31 December 2018 was £11.56 (2017: £15.86, 2016: £16.45) and the average ADR price for the same period was $77.31 (2017: $101.86, 2016: $111.20). 26. OTHER RESERVES Other reserves comprise the following: Capital Total redemption Equity Revaluation Translation other reserve reserve reserve reserve reserves £m £m £m £m £m 1 January 2017 2.7 (247.1) 271.3 1,158.3 1,185.2 Exchange adjustments on foreign currency net investments – – – (445.5) (445.5) Gain on revaluation of available for sale investments – – 32.1 – 32.1 Recognition and remeasurement of financial instruments – (10.1) – – (10.1) 31 December 2017 2.7 (257.2) 303.4 712.8 761.7 Exchange adjustments on foreign currency net investments – – – 69.9 69.9 Accounting policy change (IFRS 9)1 – – (303.4) (104.0) (407.4) Recognition and remeasurement of financial instruments – (30.7) – – (30.7) 31 December 2018 2.7 (287.9) – 678.7 393.5 Note 1 Due to the adoption of IFRS 9, cumulative gains and losses on revaluation of available for sale investments have been transferred to retained earnings, as described in the accounting policies. WPP ANNUAL REPORT 2018 155

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. ACQUISITIONS The Group accounts for acquisitions in accordance with IFRS 3 Business Combinations. IFRS 3 requires the acquiree’s identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3. The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date. Book Fair Fair value at value value to acquisition adjustments Group £m £m £m Intangible assets – 40.3 40.3 Property, plant and equipment 3.1 – 3.1 Cash 5.0 – 5.0 Trade receivables due within one year 43.7 – 43.7 Other current assets 20.3 – 20.3 Total assets 72.1 40.3 112.4 Current liabilities (42.8) – (42.8) Trade and other payables due after one year (2.4) (13.5) (15.9) Deferred tax liabilities – (9.9) (9.9) Provisions – (0.4) (0.4) Total liabilities (45.2) (23.8) (69.0) Net assets 26.9 16.5 43.4 Non-controlling interests (6.3) Fair value of equity stake in associate undertakings before acquisition of controlling interest (3.1) Goodwill 141.6 Consideration 175.6 Consideration satis?ed by: Cash 127.4 Payments due to vendors 48.2 Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is £65.3 million. Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed between 31 December 2018 and the date the financial statements have been authorised for issue. 28. RELATED PARTY TRANSACTIONS From time to time the Group enters into transactions with its associate undertakings. These transactions were not material for any of the years presented. 29. RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE Management includes non-GAAP measures as they consider these measures to be both useful and necessary. They are used by management for internal performance analyses; the presentation of these measures facilitates comparability with other companies, although management’s measures may not be calculated in the same way as similarly titled measures reported by other companies; and these measures are useful in connection with discussions with the investment community. Reconciliation of revenue to revenue less pass-through costs: 2018 20171 20161 £m £m £m Revenue 15,602.4 15,804.2 14,887.3 Media pass-through costs (1,458.0) (1,429.4) (1,276.2) Data collection pass-through costs (609.2) (646.4) (669.8) Other pass-through costs (708.6) (558.8) (512.7) Revenue less pass-through costs 12,826.6 13,169.6 12,428.6 Note 1 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. Pass-through costs comprise fees paid to external suppliers when they are engaged to perform part or all of a specific project and are charged directly to clients, predominantly media and data collection costs. This includes the cost of media where the Group’s media investment management sub-sector is buying digital media for its own account on a transparent opt-in basis and, as a result, the subsequent media pass-through costs have to be accounted for as revenue, as well as billings. In addition, the data investment management sector, which forms a significant part of the Group’s revenue and in which none of the Group’s direct competitors have a significant presence, includes pass-through costs, principally for data collection. Therefore, management considers that revenue less pass-through costs gives a reflection of top-line performance. 156 WPP ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Reconciliation of pro?t before interest and taxation to headline PBIT: 2018 2017 2016 £m £m £m Pro?t before interest and taxation 1,474.9 2,021.7 2,112.9 Amortisation assets and impairment of acquired intangible 280.0 195.1 168.4 Goodwill impairment 183.9 27.1 27.0 Gains on disposal of investments and subsidiaries (235.5) (129.0) (44.3) interests (Gains)/losses arising on from remeasurement a change in scope of equity of ownership (2.0) 0.3 (232.4) Investment write-downs 2.0 95.9 86.1 Restructuring and transformation costs 302.3 56.8 27.4 Share of exceptional losses/(gains) of associates 41.7 (0.8) 15.2 Headline PBIT 2,047.3 2,267.1 2,160.3 Finance income 104.8 95.2 80.4 Finance costs (289.3) (269.8) (254.5) (184.5) (174.6) (174.1) Interest cover on headline PBIT times 11.1 times 13.0 times 12.4 Headline PBIT is one of the metrics that management uses to assess the performance of the business. Headline PBIT margin1 before and after share of results of associates: Margin 2018 Margin2 20172 Margin2 20162 % £m % £m % £m Revenue through costs less pass- 12,826.6 13,169.6 12,428.6 Headline PBIT 16.0% 2,047.3 17.2% 2,267.1 17.4% 2,160.3 Share associates of results (excluding of exceptional gains/losses) (85.2) (112.7) (65.0) Headline operating pro?t 15.3% 1,962.1 16.4% 2,154.4 16.9% 2,095.3 Notes 1 Previously referred to as revenue less pass-through costs margin. 2 Prior year ?gures have been restated for the impact of the adoption of IFRS 15 Revenue from Contracts with Customers, as described in the accounting policies. Calculation of headline EBITDA: 2018 2017 2016 £m £m £m Headline PBIT (as above) 2,047.3 2,267.1 2,160.3 Depreciation of property, plant and equipment 225.1 230.7 220.8 Amortisation of other intangible assets 38.7 36.3 38.6 Headline EBITDA 2,311.1 2,534.1 2,419.7 Headline EBITDA is a key metric that private equity firms, for example, use for valuing companies, and is one of the metrics that management uses to assess the performance of the business. Calculation of headline non-controlling interests: 2018 2017 2016 £m £m £m Non-controlling interests 76.5 95.7 101.5 and Non-controlling transformation interests costs relating to restructuring 4.7 – – Headline non-controlling interests 81.2 95.7 101.5 Reconciliation of pro?t before taxation to headline PBT and headline earnings: 2018 2017 2016 £m £m £m Pro?t before taxation 1,463.3 2,109.3 1,890.5 Amortisation intangible assets and impairment of acquired 280.0 195.1 168.4 Goodwill impairment 183.9 27.1 27.0 Gains on disposal of investments and subsidiaries (235.5) (129.0) (44.3) (Gains)/losses interests arising on from remeasurement a change in scope of equity of ownership (2.0) 0.3 (232.4) Investment write-downs 2.0 95.9 86.1 Restructuring and transformation costs 302.3 56.8 27.4 Share of exceptional losses/(gains) of associates 41.7 (0.8) 15.2 Revaluation of ?nancial instruments (172.9) (262.2) 48.3 Headline PBT 1,862.8 2,092.5 1,986.2 Headline tax charge (419.1) (460.3) (417.2) Headline non-controlling interests (81.2) (95.7) (101.5) Headline earnings 1,362.5 1,536.5 1,467.5 Ordinary dividends paid 747.4 751.5 616.5 Dividend cover on headline earnings times 1.8 times 2.0 times 2.4 Headline PBT and headline earnings are metrics that management use to assess the performance of the business. Reconciliation of free cash ?ow: 2018 2017 2016 £m £m1 £m1 Cash generated by operations 2,174.7 1,938.9 2,283.3 Plus: Interest received 90.4 76.9 73.9 Investment income 15.4 16.8 12.5 Dividends from associates 49.7 46.8 60.4 Share option proceeds 1.2 6.4 27.2 Proceeds equipment on disposal of property, plant and 9.5 8.0 7.7 Less: Earnout payments (120.2) (199.1) (92.3) Interest and similar charges paid (252.8) (246.6) (242.1) Purchases of property, plant and equipment (314.8) (288.9) (252.1) Purchases capitalised of computer other intangible software) assets (including (60.4) (37.3) (33.0) Corporation and overseas tax paid (383.6) (424.7) (414.2) Dividends subsidiary paid undertakings to non-controlling interests in (106.2) (87.8) (89.6) Free cash ?ow 1,102.9 809.4 1,341.7 Note 1 Prior year free cash ?ow has been re-presented to include movements in working capital and provisions and exclude earnout payments. The Group bases its internal cash flow objectives on free cash flow. Management believes free cash flow is meaningful to investors because it is the measure of the Group’s funds available for acquisition-related payments, dividends to shareholders, share repurchases and debt repayment. The purpose of presenting free cash flow is to indicate the ongoing cash generation within the control of the Group after taking account of the necessary cash expenditures of maintaining the capital and operating structure of the Group (in the form of payments of interest, corporate taxation and capital expenditure). CONSTANT CURRENCY AND PRO FORMA (‘LIKE-FOR-LIKE’) These consolidated financial statements are presented in pounds sterling. However, the Group’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralise foreign exchange impact and illustrate the underlying change in revenue and profit from one year to the next, the Group has adopted the practice of discussing results in both reportable currency (local currency results translated into pounds sterling at the prevailing foreign exchange rate) and constant currency. Management also believes that discussing pro forma or like-for-like contributes to the understanding of the Group’s performance and trends because it allows for meaningful comparisons of the current year to that of prior years. Further details of the constant currency and pro forma methods are given in the financial glossary on pages 178 and 179. 157

FINANCIAL STATEMENTS COMPANY PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018 2018 2017 Notes £m £m Turnover – – Operating income 10.8 14.1 Operating pro?t 10.8 14.1 Income from shares in Group undertakings 35.9 –Interest payable and similar charges 31 (127.1) (99.3) Revaluation of ?nancial instruments – 0.6 Loss on ordinary activities before taxation (80.4) (84.6) Taxation on loss on ordinary activities 32 – –Loss for the year (80.4) (84.6) Note The accompanying notes form an integral part of this pro?t and loss account. All results are derived from continuing activities. There are no recognised gains or losses in either year, other than those shown above, and accordingly no statement of comprehensive income has been prepared. 158 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS COMPANY BALANCE SHEET AS AT 31 DECEMBER 2018 2018 2017 Notes £m £m Fixed assets Investments 33 13,160.1 13,075.3 13,160.1 13,075.3 Current assets Debtors due within one year 34 1,676.2 1,661.7 Current liabilities Creditors: amounts falling due within one year 35 (6,368.1) (5,452.9) Net current liabilities (4,691.9) (3,791.2) Total assets less current liabilities 8,468.2 9,284.1 Creditors: amounts falling due after more than one year 36 (1,389.8) (1,359.6) Net assets 7,078.4 7,924.5 Capital and reserves Called-up share capital 133.3 133.3 Share premium account 569.7 568.5 Other reserves 37 (10.0) (10.0) Capital redemption reserve 2.7 2.7 Own shares (1,046.9) (944.1) Pro?t and loss account 7,429.6 8,174.1 Equity shareholders’ funds 7,078.4 7,924.5 Note The accompanying notes form an integral part of this balance sheet. The financial statements were approved by the Board of Directors and authorised for issue on 10 April 2019. Mark Read Paul Richardson Chief Executive Officer Group Finance Director Registered Company Number: 111714 WPP ANNUAL REPORT 2018 159

FINANCIAL STATEMENTS COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Total Capital equity Ordinary Share Translation redemption Own Pro?t and shareholders’ share capital premium reserves reserve shares loss account funds £m £m £m £m £m £m £m Balance at 1 January 2017 133.2 562.2 (10.0) 2.7 (766.7) 9,017.4 8,938.8 Ordinary shares issued 0.1 6.3 – – – – 6.4 Treasury share additions – – – – (289.6) – (289.6) Treasury share allocations – – – – 112.2 (112.2) –Loss for the year – – – – – (84.6) (84.6) Dividends paid – – – – – (751.5) (751.5) Non-cash share-based incentive plans (including share options) – – – – – 105.0 105.0 Balance at 31 December 2017 133.3 568.5 (10.0) 2.7 (944.1) 8,174.1 7,924.5 Ordinary shares issued – 1.2 – – – – 1.2 Treasury share additions – – – – (104.3) – (104.3) Treasury share allocations – – – – 1.5 (1.5) –Loss for the year – – – – – (80.4) (80.4) Dividends paid – – – – – (747.4) (747.4) Non-cash share-based incentive plans (including share options) – – – – – 84.8 84.8 Balance at 31 December 2018 133.3 569.7 (10.0) 2.7 (1,046.9) 7,429.6 7,078.4 Note The accompanying notes form an integral part of this statement of changes in equity. 160 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS 30. ACCOUNTING POLICIES E) GROUP AND TREASURY SHARE TRANSACTIONS The principal accounting policies of WPP plc (the Company) are summarised Where a parent entity grants rights to its equity instruments to employees of a below. These accounting policies have all been applied consistently subsidiary, and such share-based compensation is accounted for as equity-throughout the year and preceding year. settled in the consolidated financial statements of the parent, IFRS 2 (share-based payment) requires the subsidiary to record an expense for such A) BASIS OF ACCOUNTING compensation with a corresponding increase recognised in equity as a The separate financial statements of the Company are prepared under the contribution from the parent. Consequently, in the financial statements of the historical cost convention in accordance with the Companies (Jersey) Law parent (WPP plc), the Company has recognised an addition to fixed asset 1991. The company meets the definition of a qualifying entity under FRS 100 investments of the aggregate amount of these contributions of £84.8 million in (Financial Reporting Standard 100) issued by the Financial Reporting Council. 2018 (2017: £105.0 million), with a credit to equity for the same amount. These financial statements were prepared in accordance with Financial F) FOREIGN CURRENCY AND INTEREST RATE HEDGING Reporting Standard 101 Reduced Disclosure Framework. As permitted by FRS The Company’s policy on interest rate and foreign exchange rate management 101, the Company has taken advantage of the disclosure exemptions available sets out the instruments and methods available to hedge interest and currency under that standard in relation to share-based payment, financial instruments, risk exposures and the control procedures in place to ensure effectiveness. capital management, presentation of a cash-flow statement and certain related party transactions. The Company uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Company does not Where required, equivalent disclosures are given in the consolidated financial hold or issue derivative financial instruments for speculative purposes. statements. The financial statements are prepared on a going concern basis, further details of which are in the Directors’ report on page 79. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at The Group has adopted IFRS 9 Financial Instruments from 1 January 2018. each balance sheet date. The resulting gain or loss is recognised in profit or The requirement under IFRS 9 to use an expected loss method of impairment loss immediately unless the derivative is designated and effective as a hedging of financial assets did not have a material effect on the Company due to instrument, in which event the timing of the recognition in profit or loss materially all financial assets being owed by subsidiary undertakings and depends on the nature of the hedge relationship. are expected to be paid in full. At the inception of the hedge relationship the entity documents the B) TRANSLATION OF FOREIGN CURRENCY relationship between the hedging instrument and hedged item, along with its Foreign currency transactions arising from operating activities are translated risk management objectives and its strategy for undertaking various hedge from local currency into pounds sterling at the exchange rates prevailing at the transactions. Furthermore, at the inception of the hedge and on an ongoing date of the transaction. Monetary assets and liabilities denominated in foreign basis, the Company documents whether the hedging instrument that is used currencies at the period end are translated at the period-end exchange rate. in a hedging relationship is highly effective in offsetting changes in fair values Foreign currency gains or losses are credited or charged to the profit and loss or cash flows of the hedged item. account as they arise. Changes in the fair value of derivatives that are designated and qualify as fair value C) INVESTMENTS hedges are recorded in profit or loss immediately, together with any changes in Fixed asset investments are stated at cost less provision for impairment. the fair value of the hedged item that is attributable to the hedged risk. D) TAXATION The effective portion of changes in the fair value of derivatives that are Current tax is provided at amounts expected to be paid (or recovered) using designated and qualify as cash flow or net investment hedges is deferred in the tax rates and laws that have been enacted or substantively enacted by the equity. The gain or loss relating to the ineffective portion is recognised balance sheet date. immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. Deferred tax is the tax expected to be payable or recoverable on differences However, when the forecast transaction that is hedged results in the between the carrying amounts of assets and liabilities in the financial recognition of a non-financial asset or a non-financial liability, the gains and statements and the corresponding tax bases used in the computation of losses previously deferred in equity are transferred from equity and included in taxable profit, and is accounted for using the balance sheet liability method. the initial measurement of the cost of the asset or liability. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted by IAS 12 Income Taxes. Deferred tax is charged or Hedge accounting is discontinued when the hedging instrument expires or is credited in the consolidated income statement, except when it relates to sold, terminated, or exercised, or no longer qualifies for hedge accounting. At items charged or credited to other comprehensive income or directly to that time, any cumulative gain or loss on the hedging instrument recognised in equity, in which case the deferred tax is also dealt with in other equity is retained in equity until the forecast transaction occurs. If a hedged comprehensive income or equity. Deferred tax assets are recognised to the transaction is no longer expected to occur, the net cumulative gain or loss extent that it is probable that taxable profits will be available against which recognised in equity is transferred to net profit or loss for the period. deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial Derivatives embedded in other financial instruments or other host contracts recognition of goodwill or other assets and liabilities (other than in a business are treated as separate derivatives when their risks and characteristics are not combination) in a transaction that affects neither the tax profit nor the closely related to those of host contracts and the host contracts are not accounting profit. carried at fair value with unrealised gains or losses reported in the consolidated income statement. WPP ANNUAL REPORT 2018 161

FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS 31. INTEREST PAYABLE AND SIMILAR CHARGES 2018 2017 £m £m Interest payable on corporate bonds – 6.0 Bank and other interest payable 37.8 18.1 Interest payable to subsidiary undertakings 89.3 75.2 127.1 99.3 32. TAXATION ON LOSS ON ORDINARY ACTIVITIES The tax assessed for the year differs from that resulting from applying the rate of corporation tax in the UK of 19% (2017: 19.25%). The differences are explained below: 2018 2017 £m £m Loss on ordinary activities before tax (80.4) (84.6) Tax at the rate of 19% (2017: 19.25%) thereon 15.3 16.3 Factors affecting tax charge for the year: Revaluation of ?nancial instruments – 0.1 Group relief not paid for (22.1) (8.7) Items that are not deductible/(taxable) 6.8 (7.7) Tax charge for the year – – 33. FIXED ASSET INVESTMENTS The following are included in the net book value of fixed asset investments: Subsidiary undertakings £m 1 January 2018 13,075.3 Additions 84.8 31 December 2018 13,160.1 Fixed asset investments primarily represent 100% of the issued share capital of WPP Jubilee Limited, a company incorporated in Great Britain. Fixed asset investments were purchased in a share-for-share exchange. At 31 December 2018 cost and net book value were the same. 34. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in debtors falling due within one year: 2018 2017 £m £m Amounts owed by subsidiary undertakings 1,675.6 1,661.4 Other debtors 0.6 0.3 1,676.2 1,661.7 35. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in creditors falling due within one year: 2018 2017 £m £m Bank overdrafts 1,174.1 2,627.7 Amounts due to subsidiary undertakings 5,190.3 2,808.3 Interest payable on corporate bonds and bank overdrafts 1.6 2.5 Other creditors and accruals 2.1 14.4 6,368.1 5,452.9 36. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR The following are included in creditors falling due after more than one year: 2018 2017 £m £m Amounts due to subsidiary undertakings 1,389.8 1,359.6 Total borrowings are repayable as follows: 2018 2017 £m £m Within one year 6,368.1 5,452.9 Between one and ?ve years 1,010.9 673.7 Over ?ve years 378.9 685.9 7,757.9 6,812.5 37. EQUITY SHAREHOLDERS’ FUNDS Other reserves at 31 December 2018 comprise a translation reserve of £10.0 million (2017: £10.0 million). At 31 December 2018 the Company’s distributable reserves amounted to £6,942.4 million (2017: £7,788.5 million). Further details of the Company’s share capital are shown in note 25. 162 WPP ANNUAL REPORT 2018

FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION In our opinion: – the financial statements of WPP plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2018 and of the Group’s profit and the Parent Company’s loss for the year then ended; – the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB); – the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 “Reduced Disclosure Framework”; and – the financial statements have been properly prepared in accordance with the Companies (Jersey) Law 1991. We have audited the financial statements which comprise: – the accounting policies; – the consolidated income statement (excluding the US dollar information); – the consolidated statement of comprehensive income; – the consolidated cash flow statement; – the consolidated balance sheet; – the consolidated statement of changes in equity; – the Parent Company profit and loss account, balance sheet and statement of changes in equity; and – the related notes 1 to 37. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. SUMMARY OF OUR AUDIT APPROACH Key audit matters The key audit matters that we identified in the current year were: – Revenue recognition: estimate of revenue recognised over time based on the proportion of the level of service performed for open projects at year-end within the Kantar network – Goodwill – Restructuring and transformation costs – Taxation reserves Within this report, any new key audit matters are identified with and any key audit matters which are the same as the prior year identified with . Materiality The materiality that we used for the Group financial statements was £80.0 million (2017: 105.5 million) which we determined using 5.5% (2017: 5%) of pre-tax profit. Scoping Those entities subject to audit provide coverage for 76% of the Group’s consolidated revenue (2017: 78%) and 81% of the Group’s consolidated operating profit (2017: 83%); achieved through a combination of direct testing and specified audit procedures (including substantive analytical review procedures) performed by the Group auditor and/or component auditors across the world. Significant changes in There have been no significant changes in our approach compared with the prior year. However, we revised our assessment of key audit our approach matters as detailed below. WPP ANNUAL REPORT 2018 163

FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT GOING CONCERN We reviewed the Strategic report to shareholders on page 79 to the financial statements as to 1) whether they considered it appropriate to adopt the going concern basis of accounting in the financial statements and 2) their identification of any material uncertainties to the Group’s and Parent Company’s ability to conclude that the going concern basis of accounting is appropriate for a period of at least twelve months from the date of approval of the financial statements. We considered as part of our risk assessment the nature of the Group, its business model and related risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting framework and the system of internal control. We evaluated the directors’ assessment of the Group’s ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the directors’ plans for future actions in relation to their going concern assessment. We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters. PRINCIPAL RISKS AND VIABILITY STATEMENT Based solely on reading the Strategic report to shareholders and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the directors’ assessment of the Group’s and the Parent Company’s ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: – the disclosures on pages 79-83 that describe the principal risks and explain how they are being managed or mitigated; – the directors’ confirmation on page 79 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or – the directors’ explanation on page 79 as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to report whether the directors’ statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Given the reduced financial significance of media volume income for the Group, we no longer identified this as a key audit matter in the current year. However, upon the announcement of the potential sale of the Kantar network, which is part of Data Investment Management, we identified that there is a potential for fraud in relation to the cut-off of revenue recognised on open projects at year-end accounted for as revenue recognised over time based on the proportion of the level of service performed within the Kantar network. Therefore, this has been included as a key audit matter in the current year. In addition, with the increase in costs incurred in respect of restructuring, we have included this as a key audit matter in the current year. 164 WPP ANNUAL REPORT 2018

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS Key audit matter description How the scope of our audit responded to the key audit matter Key observations Revenue recognition: estimate of revenue recognised over time We have: The results of our based on the proportion of the level of service performed for – Analysed the total open contracts as at the year-end by total testing were open projects at year-end within the Kantar network contract value and against prior periods to identify unusual satisfactory. Cut-off of trends; revenue recognised on Assessing the timing of recognition revenue recognised on open – Recalculated revenue recognised based on the proportion of open projects at projects at year-end and the proportion of the level of service at the level of service performed by obtaining schedules of year-end and estimated that date is an area of complexity and judgement due to the estimated costs to complete from project managers and costs to complete in need for management to estimate the costs to complete the challenging the key underlying assumptions to test their calculating the project. A risk exists that sales are incorrectly recorded in the completeness and accuracy by reference to independent data proportion of the level wrong period based on incorrect management estimates. sources; of service performed at – Confirmed contract terms and the absence of side that date appear to be Given the degree of judgement and complexity involved and agreements with customers and assessing such terms or reasonable. the announcement of the potential sale of the Kantar network agreements and basis for rebates for the period to which they (part of Data Investment Management), we also determined that may relate (for example; acceptance criteria, delivery and there was a potential for fraud through possible manipulation of payment terms, the absence of future or continuing vendor this balance. obligations, and cancellation or refund provisions which are often relevant in such circumstances); Refer to page 100 (Audit Committee report), page 124 – Inquired of the Group’s sales and marketing personnel or (accounting policies) and page 132 (notes to the consolidated in-house legal counsel regarding open projects and their financial statements). knowledge of any unusual terms or conditions associated with these transactions; – Attended year-end meetings where such projects are discussed in detail in order to observe the review control and internal challenge occurring; – Performed substantive analytical procedures relating to revenue using disaggregated data; for example, comparing revenue reported by month and by service during the current reporting period with comparable prior periods or with revenue related to cash collections. Goodwill We have: The results of our – Assessed the key assumptions used in the impairment models testing were Given the magnitude of the goodwill balance and the continued for goodwill, including specifically the operating cash flow satisfactory and we economic uncertainty in certain regions, it is important to ensure projections, discount rates, and long term growth rates; concur that the that the goodwill impairment review is approached in a robust – Compared these assumptions to externally derived data assumptions used in manner to identify potential impairments, where necessary. (where applicable) as well as forming our own assessment, the impairment models, including consideration of the potential impact of Brexit; including the discount Determining whether the carrying value of goodwill is – Our internal fair value specialists assisted in computing an rates, and level of recoverable requires management to make significant estimates independent assessment of the discount rates used and goodwill impairment concerning the estimated future cash flows and associated assessing the methodology used in preparing the impairment booked in the year are discount rates and growth rates based on management’s view of testing models; appropriate. future business prospects, including revenue growth and – Tested the integrity and mathematical accuracy of the operating margin. The Group is highly acquisitive. As such, given impairment models; and the magnitude of the goodwill balance (2018: £13,202.8 million, – Considered the sensitivity of the impairment testing model to 2017: £12,952.9 million), and the relative sensitivity to certain changes in key assumptions. inputs to the impairment testing process, in particular the discount rate, the valuation of goodwill is considered a key audit We also considered the adequacy of the Group’s disclosures in matter. respect of its goodwill impairment testing and goodwill impairment recognised, including whether disclosures about the Certain parts of the business, including, in particular VMLY&R, sensitivity of the outcome of the impairment assessment to were sensitive to the assumptions used in the impairment review reasonably possible changes in key assumptions properly and were treated as a key audit matter in the current year. reflected the risks inherent in such assumptions. Refer to page 100 (Audit Committee report), page 123 (accounting policies) and page 140 (notes to the consolidated financial statements). WPP ANNUAL REPORT 2018 165

FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC Key audit matter description How the scope of our audit responded to the key audit matter Key observations Restructuring and transformation costs We have: The results of our – Performed a walkthrough of the process performed by testing were Management has implemented a restructuring and Management and tested the design, implementation and satisfactory and we transformation programme as part of a strategic review in the operating effectiveness of key controls identified; conclude that the current year. – Made enquiries made of management of the operating restructuring and companies and have corroborated our understanding of the transformation costs Management judgement is required to determine whether a restructuring programmes in place gained at a Group level; recognised in the year restructuring cost can be recognised in the year. Restructuring and appear to have been and transformation costs were £302.3 million for the year ended – Performed substantive testing by selecting a sample of costs appropriately 31 December 2018 (2017: £56.8 million) as highlighted in note 3 and obtaining supporting documentation, at a component accounted for. and within the Audit Committee report. The key judgements and global level. For the sample selected we have assessed include assessing whether the timing and extent of the plans and whether the recognition criteria as set out in IAS 37 Provisions, their communication to those likely to be affected meet the Contingent Assets and Contingent Liabilities have been met in requirements set out in IAS 37 Provisions, Contingent Assets and the year such that the cut-off of the costs has been Contingent Liabilities. appropriately accounted for and that management’s estimates at the year-end date are reasonable. We therefore identified a key audit matter in relation to the cut-off such costs as recognised in the year. Taxation reserves We have: The results of our – Discussed and considered all significant taxation exposures testing were There is uncertainty in respect of resolving matters with tax with Group management including their tax specialists; and satisfactory. There were authorities around the world. The highly disaggregated nature of – Together with our internal taxation specialists we challenged no material exceptions the Group coupled with its acquisitive nature means that there the estimates and judgements made by management when noted when are a number of different tax jurisdictions in which the Group calculating the income tax payable in each territory and the corroborating could be liable to pay additional tax above the amount due associated provisions held. management’s based on its tax returns, making potential tax exposures a key judgement to the audit matter. Therefore assessing the Group’s exposure to We reviewed correspondence with taxation authorities in correspondence and significant tax risks and the level of provisions recognised is an significant locations where available, as well as reviewing the support reviewed for area of judgement. support or opinions received from external counsel and other those significant tax advisors where management has utilised such opinions to make reserves. Refer to page 100 (Audit Committee report), page 125 assumptions on the level of taxation payable. (accounting policies) and page 136 (notes to the consolidated financial statements). OUR APPLICATION OF MATERIALITY Based on our professional judgement, we determined materiality for the We define materiality as the magnitude of misstatement in the financial financial statements as a whole as follows: statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality Group Parent Company both in planning the scope of our audit work and in evaluating the results of financial statements financial statements our work. Materiality £80.0 million £32.0 million (2017: £105.5 million) (2017: £42.2 million) Group materiality £80m Basis for 5.5% of profit before tax The basis of materiality determining (2017: 5.0% of profit is shareholder’s equity, materiality before tax) taking into account the PBT Group materiality. The £1,463.3m materiality used is less than 1% of shareholder’s Audit Committee equity (2017: less than 1% reporting threshold of shareholder’s equity). £1.5m Rationale We have determined that the critical Given the nature of the PBT Group materiality for the benchmark for the Group was pre-tax Company as a parent benchmark profit because we consider this company, we consider applied measure to be what the shareholders shareholder’s equity to believe to be a key performance be the most indicator for the Group. We also appropriate basis for considered this measure to be materiality. We have, suitable having compared to another however, capped the benchmark: our materiality is below materiality at 40% of 1% of equity (2017: below 1%). Group Materiality (2017: Materiality is lower than for the year 40% of Group ended 31 December 2017 primarily as Materiality). a result of a lower pre-tax profit achieved in 2018. 166 WPP ANNUAL REPORT 2018

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS We agreed with the Audit Committee that we would separately report to the OTHER INFORMATION Committee all audit differences in excess of £1.5 million (2017: £1.5 million), as The directors are responsible for the other information. The other information well as differences below that threshold that, in our view, warranted reporting comprises the information included in the Annual Report, other than the on qualitative grounds. We also report to the Audit Committee on disclosure financial statements and our auditor’s report thereon. matters that we identified when assessing the overall presentation of the financial statements. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. AN OVERVIEW OF THE SCOPE OF OUR AUDIT As a result of the highly disaggregated nature of the Group, with operations In connection with our audit of the financial statements, our responsibility is to in 112 countries and more than 3,000 offices among more than 150 companies read the other information and, in doing so, consider whether the other within the Group, a significant portion of audit planning time is spent so that information is materially inconsistent with the financial statements or our the scope of our work is appropriate to address the Group’s identified risks knowledge obtained in the audit or otherwise appears to be materially of material misstatement. misstated. In selecting the components that are in scope each year, we refresh and If we identify such material inconsistencies or apparent material update our understanding of the Group and its environment, including misstatements, we are required to determine whether there is a material obtaining an understanding of the Group’s system of internal controls, and misstatement in the financial statements or a material misstatement of the assessing the risks of material misstatement at the Group level, in order to other information. If, based on the work we have performed, we conclude that check that the units selected provide an appropriate basis on which to there is a material misstatement of this other information, we are required to undertake audit work to address the identified risks of material misstatement. report that fact. Such audit work represents a combination of procedures, all of which are designed to target the Group’s identified risks of material misstatement in In this context, matters that we are specifically required to report to you as the most effective manner possible. uncorrected material misstatements of the other information include where we conclude that: Those entities subject to audit provide for coverage of 76% of the Group’s – Fair, balanced and understandable – the statement given by the directors consolidated revenue (2017: 78%) and 81% of the Group’s consolidated that they consider the Annual Report and financial statements taken as a operating profit (2017: 83%); achieved through a combination of direct testing whole is fair, balanced and understandable and provides the information and specified audit procedures (including substantive analytical review necessary for shareholders to assess the Group’s position and performance, procedures) performed by the Group auditor and/or component auditors business model and strategy, is materially inconsistent with our knowledge across the world. Our audit work at the components is executed at levels obtained in the audit; or of materiality appropriate for such components, many of which are local – Audit Committee reporting – the section describing the work of the Audit statutory materiality levels which in all instances are capped at 40% of Committee does not appropriately address matters communicated by us to Group materiality. the Audit Committee; or – Directors’ statement of compliance with the UK Corporate Governance In order to support our conclusion that there were no significant risks of Code – the parts of the directors’ statement required under the Listing material misstatement of the aggregated financial information of the remaining Rules relating to the company’s compliance with the UK Corporate components not subject to audit, we tested the consolidation process and Governance Code containing provisions specified for review by the auditor carried out analytical procedures at the parent entity level. in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. HOW WE WORK CLOSELY WITH COMPONENT AUDITORS The Group audit team plans its visits to component auditors based on a We have nothing to report in respect of these matters. carefully designed programme, which considers a variety of factors including size of entity and number of significant risks; this programme is put in place to RESPONSIBILITIES OF DIRECTORS check that appropriate oversight and guidance is provided to the component As explained more fully in the directors’ responsibilities statement, the auditors through a combination of: directors are responsible for the preparation of the financial statements and – upfront team briefings to all component teams; for being satisfied that they give a true and fair view, and for such internal – site visits; control as the directors determine is necessary to enable the preparation of – central review of documentation; and financial statements that are free from material misstatement, whether due to – risk assessment discussions and detailed workpaper reviews. fraud or error. These are designed so that the Senior Statutory Auditor or a senior member of In preparing the financial statements, the directors are responsible for the Group audit team visits all key locations across the Group on regular basis. assessing the Group’s and the Parent Company’s ability to continue as a going In addition we assess the competence of our component auditors. concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to In years when we do not visit a key location we will: liquidate the Group or the Parent Company or to cease operations, or have no – include the component audit partner in our team briefing; realistic alternative but to do so. – discuss their risk assessment; and – review documentation of the findings from their work. We also hold quarterly meetings with management at a regional and global level in order to update our understanding of the Group and its environment on an ongoing basis. WPP ANNUAL REPORT 2018 167

FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC AUDITOR’S RESPONSIBILITIES FOR THE AUDIT AUDIT RESPONSE TO RISKS IDENTIFIED OF THE FINANCIAL STATEMENTS As a result of performing the above, we identified the fraud risk in relation to Our objectives are to obtain reasonable assurance about whether the financial the cut-off of revenue recognised on open projects at year-end and estimated statements as a whole are free from material misstatement, whether due to costs to complete in calculating the proportion of the level of service fraud or error, and to issue an auditor’s report that includes our opinion. performed at that date in the Kantar network as a key audit matter. The key Reasonable assurance is a high level of assurance, but is not a guarantee that audit matters section of our report explains this matter in more detail and an audit conducted in accordance with ISAs (UK) will always detect a material also describes the specific procedures we performed in response to that key misstatement when it exists. Misstatements can arise from fraud or error and audit matter. are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on In addition to the above, our procedures to respond to risks identified the basis of these financial statements. included the following: – reviewing the financial statement disclosures and testing to supporting Details of the extent to which the audit was considered capable of detecting documentation to assess compliance with relevant laws and regulations irregularities, including fraud are set out below. discussed above; – enquiring of management, the Audit Committee and internal and external A further description of our responsibilities for the audit of the financial legal counsel concerning actual and potential litigation and claims; statements is located on the FRC’s website at: www.frc.org.uk/ – performing analytical procedures to identify any unusual or unexpected auditorsresponsibilities. This description forms part of our auditor’s report. relationships that may indicate risks of material misstatement due to fraud; – reading minutes of meetings of those charged with governance, reviewing EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF internal audit reports and reviewing correspondence with relevant tax DETECTING IRREGULARITIES, INCLUDING FRAUD authorities; and We identify and assess the risks of material misstatement of the financial – in addressing the risk of fraud through management override of controls, statements, whether due to fraud or error, and then design and perform audit testing the appropriateness of journal entries and other adjustments; procedures responsive to those risks, including obtaining audit evidence that assessing whether the judgements made in making accounting estimates is sufficient and appropriate to provide a basis for our opinion. are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course IDENTIFYING AND ASSESSING POTENTIAL RISKS RELATED TO of business. IRREGULARITIES In identifying and assessing risks of material misstatement in respect of We also communicated relevant identified laws and regulations and potential irregularities, including fraud and non-compliance with laws and regulations, fraud risks to all engagement team members including internal specialists and our procedures included the following: significant component audit teams, and remained alert to any indications of – enquiring of management, internal audit and the Audit Committee, fraud or non-compliance with laws and regulations throughout the audit. including obtaining and reviewing supporting documentation, concerning the Group’s policies and procedures relating to: REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS – identifying, evaluating and complying with laws and regulations and OPINIONS ON OTHER MATTERS PRESCRIBED BY OUR ENGAGEMENT whether they were aware of any instances of non-compliance; LETTER – detecting and responding to the risks of fraud and whether they have In our opinion the part of the Directors’ Remuneration report to be audited has knowledge of any actual, suspected or alleged fraud; and been properly prepared in accordance with the UK Companies Act 2006 as if – the internal controls established to mitigate risks related to fraud or that Act had applied to the Company. non-compliance with laws and regulations. – discussing among the engagement team including significant component In our opinion, based on the work undertaken in the course of the audit: audit teams and involving relevant internal specialists, including tax, – the information given in the Strategic report and the Corporate Governance valuations, pensions and IT specialists regarding how and where fraud report for the financial year for which the financial statements are prepared might occur in the financial statements and any potential indicators of fraud. is consistent with the financial statements; and As part of this discussion, we identified potential for fraud in relation to the – the Strategic report and the Corporate Governance report have been cut-off of revenue recognised on open projects at year-end and estimated prepared in accordance with applicable legal requirements. costs to complete in calculating the proportion of the level of service performed at that date in the Kantar network; and In the light of the knowledge and understanding of the Group and the Parent – obtaining an understanding of the legal and regulatory frameworks that the Company and their environment obtained in the course of the audit, we have Group operates in, focusing on those laws and regulations that had a direct not identified any material misstatements in the Strategic report or the effect on the financial statements or that had a fundamental effect on the directors’ report. operations of the Group. The key laws and regulations we considered in this context included various taxation laws, Securities and Exchange Commission, Major Securities Law, Listing Rules, European Union law and Companies (Jersey) Law. In addition, compliance with the Group’s regulatory solvency requirements were fundamental to the Group’s ability to continue as a going concern. 168 WPP ANNUAL REPORT 2018

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION OTHER MATTERS ADEQUACY OF EXPLANATIONS RECEIVED AND ACCOUNTING AUDITOR TENURE RECORDS Following the recommendation of the Audit Committee, we were appointed Under the Companies (Jersey) Law 1991 we are required to report to you if, in by the Company at the AGM on 20 May 2002 to audit the financial statements our opinion: for the year ending 31 December 2002 and subsequent financial periods. The – we have not received all the information and explanations we require for our period of total uninterrupted engagement including previous renewals and audit; or reappointments of the firm is 17 years, covering the years ending 31 December – proper accounting records have not been kept by the Parent Company, or 2002 to 31 December 2018. proper returns adequate for our audit have not been received from branches not visited by us; or CONSISTENCY OF THE AUDIT REPORT WITH THE ADDITIONAL – the Parent Company financial statements are not in agreement with the REPORT TO THE AUDIT COMMITTEE accounting records and returns. Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK). We have nothing to report in respect of these matters. USE OF OUR REPORT DIRECTORS’ REMUNERATION This report is made solely to the company’s members, as a body, in Under our engagement letter we are also required to report if in our opinion accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit certain disclosures of directors’ remuneration have not been made or the part work has been undertaken so that we might state to the company’s members of the directors’ remuneration report to be audited is not in agreement with those matters we are required to state to them in an auditor’s report and/or the accounting records and returns. those matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted We have nothing to report in respect of these matters. by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Richard Muschamp For and on behalf of Deloitte LLP Recognised Auditor London, United Kingdom 10 April 2019 WPP ANNUAL REPORT 2018 169