Final Results - PART ONE

WPP Group PLC
24 February 2003

PART 1

FOR IMMEDIATE RELEASE                                          24 FEBRUARY 2003

                                   WPP

            PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002

                     Revenue down almost 3% to £3.9 billion

   Profit before tax, goodwill and impairment, fixed asset gains, investment

     write-downs and FRS17 interest down almost 19% to almost £401 million

           Diluted headline earnings per share down over 19% at 24.9p

                    Final dividend up 20% to 3.67p per share





•    Revenue down almost 3% to £3.908 billion.

•    Profit before goodwill and impairment, interest, tax,
     fixed asset gains and investment write-downs down over 14% to £480.2 
     million.

•    Operating margins of 12.3%.

•    Profit before tax, goodwill and impairment, fixed
     asset gains, investment write-downs and FRS17 interest down almost 19% to 
     £400.6 million.

•    Profit before tax down 50% to £205.4 million.

•    Diluted headline earnings per share down over 19% to 24.9p from 30.9p.

•    Final dividend up 20% to 3.67p per share making a total for the year of 
     5.40p up 20% over 2001.

•    Strong estimated net new billings of over £2.4 billion
     ($3.6 billion).  Ranked top on absolute net new billings won in 2002.



In this press release not all of the figures and ratios used are readily
available from the unaudited preliminary results included in Appendix I.  Where
required, details of how these have been arrived at are shown in Appendix IV.



Summary of results



The Board of WPP Group plc ("WPP") announces the unaudited preliminary results
for the year ended 31 December 2002.  Despite very difficult trading conditions
throughout the world, these results reflect the achievement of balancing the
market pressure on revenues against reducing costs.



Reportable revenue was down almost 3% to £3.908 billion. Revenues including
associates are estimated to total £4.644 billion.  On a constant currency basis,
revenue was up 0.7% and gross profit up 0.9%.  Like-for-like revenues, excluding
the impact of acquisitions and on a constant currency basis, were down 5.9%.
Over the four quarters of 2002, like-for-like revenues have fallen by decreasing
amounts - more than -9% in quarter one, -8% in quarter two, more than -3% in
quarter three and less than -3% in quarter four.   In quarter four, North
America showed revenue growth for the first time for seven quarters of almost
2%.



Profit pre-goodwill and impairment, interest, tax, investment gains and
write-downs was down 14.4% to £480.2 million from £561.1 million and down almost
12% in constant currencies.  Pre-goodwill and impairment, reported operating
margins (including income from associates) fell to 12.3% from 14.0%.  Excluding
income from associates, reported operating margins fell less, by 1.4% from 12.9%
to 11.5%.  Post goodwill and impairment, reported profit before interest, tax,
investment gains and write-downs was down 44% to £302.5 million from £546.3
million.



Before incentive payments totalling £90.1 million or over 16% (under 14% in
2001) of operating profit before bonuses, taxes and income from associates,
operating margins fell to 13.8% from 14.9%, reflecting stronger performance of
some operating units against last year and increased provision for the LEAP
senior management incentive programme, due to stronger than anticipated WPP
total shareholder return against the peer group.  Reported operating costs
including direct costs fell by almost 1%, but rose by almost 3% in constant
currency.  However, like-for-like total operating and direct costs were down
4.6% on the previous year.  Staff costs excluding incentives were flat, as were
total salaries.  Non-staff costs rose as a proportion of revenues, primarily
reflecting the "lumpiness" of property costs as capacity is reduced.



On a reported basis the Group's staff cost to gross margin ratio, excluding
severance and incentives, increased slightly to 56.9% from 56.6%.  Variable
staff costs as a proportion of total staff costs have increased over recent
years, reaching 12.1% in 2000.  The impact of the recession in both 2001 and
2002 has reduced this ratio to 9.2% and variable staff costs as a proportion of
revenue to 5.3%.  This highlights the benefits of the increased flexibility in
the cost structure.   Actual people numbers averaged 50,417 against 50,487 in
2001, down marginally.  On a like-for-like basis, average headcount was down to
50,417 from 55,109, a decrease of over 8%.  At the end of 2002 staff numbers
were 49,439 compared with 52,670 at the end of 2001 on a pro-forma basis, a
reduction of over 6%.   Headcount numbers have been falling by approximately
half of one percent per month.



Net interest payable and similar charges (including a charge for the early
adoption of FRS17) increased to £86.4 million from £71.3 million, reflecting
lower cash generated from operations, the full year impact of the increased
level of acquisition activity in 2001 and share repurchases and cancellations in
the current year.  Headline interest cover remains at the relatively
conservative level of almost six times and at six times, excluding the FRS17
charge.



Profit before tax, investment gains and write-downs fell by over 44% to £302.5
million from £546.3 million.  On a constant currency basis, pre-tax profits were
down almost 43% reflecting the strengthening of sterling against the dollar,
counterbalanced to some extent by its weakness against the euro.   If sterling
had stayed at the same average levels as 2001, profits on this basis would have
been £315.2 million.



The Group's tax rate on headline profits was 26%, down from 27% in the previous
year, reflecting the impact of further improvements in tax planning.



Diluted headline earnings per share were down over 19% at 24.9p.  In constant
currency, earnings per share on the same basis were down under 16%.



All severance and restructuring costs have been included in operating profits.
Following the collapse in technology equity valuations in 2001, it was
considered prudent to write down the net balance sheet value of the Group's
investments in this area by £70.8 million.  2002 has seen further declines in
these technology investments, many of which are in private companies.  An
additional write-down of £19.9 million has been taken in 2002, mitigated by
gains on asset disposals of £9.2 million.  The carrying value of these
investments is now written down to £19.3 million.



In addition, a further £145.7 million was taken as an impairment charge
primarily reflecting accelerated amortisation of goodwill on first generation
businesses which have suffered in the recession.  This additional charge
represents 3.2% of the goodwill shown in the balance sheet at the start of 2002.



As a result, profit before tax fell 50% to £205.4 million and diluted earnings
per share by almost 68% to 7.7p.



The Board recommends an increase of 20% in the final dividend to 3.67p per
share, making a total of 5.40p per share for 2002, a 20% increase over 2001.
The record date for this dividend is 6 June 2003, payable on 7 July 2003.  The
dividend for 2002 is four and a half times covered by headline earnings.



Further details of WPP's financial performance are provided in Appendix I (in
sterling) and Appendix II (in euros).



As indicated previously, WPP intends to expense the cost of executive options in
its income statement.  Under United Kingdom GAAP, there is no definitive
guidance on how this is to be implemented.  However, Note 15 in Appendix I
details the impact of expensing executive options using a Black Scholes
valuation model and applying United States transitional guidelines contained in
FAS 148.  On this basis, only executive options issued in 2002 would be expensed
in that year.  As options granted are weighted towards the second half of the
year, the resulting reduction in headline earnings per share would have been
only 0.4p.   Fully expensing all executive options granted over the last three
years on a consistent basis would reduce headline earnings per share by
approximately 7%. Appendix III shows a pro-forma unaudited income statement for
2002, on the basis of adopting United States transitional guidelines.



Review of operations



As a result of the worldwide recession, which started in the United States in
the fourth quarter of 2000 and the impact of the tragedy of 11 September, the
worldwide advertising industry shrank by approximately 5% in 2001, with
marketing services also down a similar amount.   This sharp downturn affected
the United States most significantly, but also impacted Europe, Asia Pacific and
Latin America.



The recession continued into 2002, when advertising and marketing services
expenditure was probably down again in the low single digits and the downturn
has now continued for over two years.  The tragic events of 11 September 2001
had a material negative impact on the second half of 2001 and many people
(ourselves included) felt that the second half of 2002 might see a relative
improvement, particularly given easier comparative figures. However, further
stock market nervousness in the third quarter of 2002 raised additional concerns
about corporate profitability, consumer confidence and a possible economic "
double-dip", producing a "dead-cat" bounce.



While, as mentioned above, the Group has seen a reduction in the rate of decline
in each quarter of 2002, with the United States exhibiting revenue growth in the
fourth quarter of 2002 for the first time in almost two years, the possibility
of an Iraqi conflict has increased levels of uncertainty.   As a result, 2003
will likely be another difficult year, with hopes for a more significant
recovery being pinned on 2004 and the positive impact of quadrennial factors
such as the United States Presidential Election, political advertising in the
United States pushing up media rates, the Athens Olympics and the European
Football Championships.



Network television price inflation and declining audiences, fragmentation of
traditional media and rapid development of new technologies continued to drive
experimentation by our clients in new media and non-traditional alternatives.
1998 was really the first year when WPP's marketing services activities
represented over 50% of Group revenue.  In 2002 these activities represented
over 53% of Group revenue, a little less than 2001, as advertising and media
investment management revenues were more robust than anticipated.  In addition,
in 2002, our narrowly defined internet-related revenue was over $300 million or
over 2% of our worldwide reported revenue.  This compares with approximately 5%
for on-line media's share of total advertising spend in the United States and
approximately 3% share worldwide.  The new media continue to build their share
of client spending.



Revenue and operating profit by region



The pattern of revenue growth differed regionally.  The table below gives
details of revenue and revenue growth (on a constant currency basis) by region
for 2002 as well as proportions of operating profits:


Region                                          Revenue as a       Revenue growth    Operating profit as a
                                            % of Total Group        % +/(-) 02/01         % of Total Group

North America                                           44.0                 -2.4                     50.7
United Kingdom                                          15.8                 -1.3                     13.9
Continental Europe                                      23.1                  5.3                     20.3
Asia Pacific, Latin
America, Africa & the
Middle East                                             17.1                  4.7                     15.1

Total Group                                            100.0                  0.7                    100.0



As can be seen, North America and the United Kingdom have been most affected by
the recession, with Continental Europe and Asia Pacific, Latin America, Africa
and the Middle East least affected.



Estimated net new billings of £2.4 billion ($3.6 billion) were won last year.
The Group was ranked first in the absolute net new business billings survey by
Credit Suisse First Boston for 2002 and second as a proportion of advertising
and media investment management revenues.



Revenue and operating profit by communications services sector and brand



The pattern of revenue growth also varied by communications services sector and
brand.



The table below gives details of revenue and revenue growth by communications
services sector for 2002 (on a constant currency basis) as well as proportions
of operating profits:


Communications services                        Revenue as a      Revenue growth     Operating profit as a
                                           % of Total Group       % +/(-) 02/01          % of Total Group

Advertising, Media
Investment Management                                  46.5                 2.5                      57.4
Information & Consultancy                              15.3                 4.0                       8.9
Public Relations & Public Affairs                      11.4                -8.0                       9.7
Branding & Identity, Healthcare
& Specialist Communications                            26.8                -0.2                      24.0

Total Group                                           100.0                 0.7                     100.0



As can be seen, public relations and public affairs continued to be most
affected by the recession.  Branding & identity, healthcare and specialist
communications was somewhat affected, with healthcare and direct, a part of
specialist communications, being more resilient.  Advertising and media
investment management has been less affected than anticipated and information
and consultancy has continued to see some limited growth, although it has been
increasingly affected by the recession.



Advertising and Media Investment Management



In constant currencies, this sector's revenue grew by 2.5% last year.  The
combined operating margin (including income from associates) of this group of
companies (Ogilvy & Mather Worldwide, J Walter Thompson Company, Y&R
Advertising, Red Cell, MindShare and Mediaedge:cia) was over 15%.



In 2002, Ogilvy & Mather Worldwide generated estimated net new billings of £147
million ($221 million), J Walter Thompson Company £534 million ($802 million), Y
&R Advertising £212 million ($319 million).  Red Cell, which has been
strengthened significantly by the addition of new talent,  the acquisition of
Berlin Cameron and Partners in the United States and the increase in the
shareholding in the Batey Group in Asia Pacific, generated estimated net wins of
£52 million ($78 million) excluding the recent assignment of Coca-Cola Classic
in the United States.



Also in 2002, MindShare and Mediaedge:cia generated estimated net new billings
of £1,007 million ($1,512 million).  Plans continue to be developed to form a
worldwide "WPP Media" parent company, probably to be named GMEC and will be
implemented shortly.



Information and Consultancy



Although the recession has increasingly impacted the Group's information and
consultancy businesses, on a constant currency basis revenues grew 4% in 2002,
partly driven by acquisition.  Like-for-like revenues were still down less than
1%.  Despite this overall top line performance, revenues, operating profit and
operating margins came under pressure, particularly at Center Partners and
Research International.



However, strong performances were recorded by Millward Brown at Greenfield
Consulting in the United States, the United Kingdom, IMS in Ireland, MFR and
Millward Brown in France, Spain, China and Brazil; and by Research International
in Australia, Japan, Singapore, Taiwan, Thailand and South Africa.



Public Relations and Public Affairs



In constant currencies, the Group's public relations and public affairs revenue
continued to be most affected by the recession, particularly in technology,
media and telecommunications, declining by 8%.  Burson-Marsteller, Ogilvy Public
Relations Worldwide, Robinson Lerer & Montgomery in the United States, and
Finsbury and Buchanan in the United Kingdom performed well.



Following the decline in revenues in 2001, and 2002, the public relations and
public affairs businesses reduced their costs significantly and as a result
operating margins before associates improved by over one margin point in 2002.



Branding and Identity, Healthcare and Specialist Communications



Again in constant currencies the Group's branding and identity, healthcare and
specialist communications revenues were flat compared with 2001.



Several of our companies in this sector performed particularly well:



•      in promotion and direct marketing - Wunderman in New York, Chicago and
San Francisco in the United States, in Canada, in the United Kingdom, France,
Germany, Italy, the Netherlands, Spain and Chile: OgilvyOne in Belgium, France,
Germany, Spain, India, Japan, Singapore, Thailand and Mexico.

•      in branding and identity - Landor Associates in New York and Cincinnati
in the United States; Walker Group and MJM Creative Services in the United
States: Lambie-Nairn in the United Kingdom and icon brand navigation in Germany.

•      in healthcare - CommonHealth in the United States, Sudler & Hennessey in
the United States, MarketForce Communications in Canada, Italy and Melbourne,
Australia

•      other specialist marketing resources - The Geppetto Group, Management
Ventures, Savatar and VML in the United States and The Forward Group,
Glendinning and EWA in the United Kingdom.



Manufacturing



Gross profit was down significantly with operating profit and margins similarly
impacted at the Group's manufacturing division.



Balance sheet and cash flow



An unaudited summary of the Group's consolidated balance sheet as at 31 December
2002 is attached in Appendix 1 (in sterling) and in Appendix II (in euros).  As
at 31 December 2002, the Group's net debt fell to £727 million compared with
£885 million at 31 December 2001 (2001 - £893 million on the basis of 2002 year
end exchange rates), following net cash expenditure of £280 million on
acquisitions (including £94 million of loan note redemptions) and £76 million on
share repurchases.



Net debt averaged £1,343 million in 2002, up £509 million against £834 million
in 2001 (up £521 million at 2002 exchange rates), primarily reflecting the full
year impact of acquisitions made in 2001.  These net debt figures compare with a
current equity market capitalisation of approximately £4.4 billion, giving a
total enterprise value of approximately £5.7 billion.



Cash flow strengthened as a result of improved working capital management and
cash flow from operations.  In 2002, operating profit before goodwill
amortisation and impairment was £450 million, capital expenditure £101 million,
depreciation £117 million, tax paid £85 million, interest and similar charges
paid £78 million and other net cash inflows of £46 million.  Free cash flow
available for debt repayment, acquisitions, share buybacks and dividends was
therefore £349 million.  This free cash flow was absorbed by acquisition
payments and investments of £281 million, share repurchases and cancellations of
£76 million and dividends of £56 million.  The Company almost fulfilled its
recently set objective of covering acquisition payments and share repurchases
and cancellations from free cash flow.  A summarised unaudited consolidated cash
flow statement is included in Appendix I.



In the first six weeks of 2003 up until 12 February, the last date for which
information is available prior to this announcement, net debt averaged £1,095
million versus net debt of £1,075 million for the same period last year at 2003
exchange rates.



Your Board continues to examine ways of deploying its substantial cash flow of
over £400 million per annum to enhance share owner value.  As necessary capital
expenditure is expected to remain equal to or less than the depreciation charge,
the Company has concentrated on examining acquisitions or returning excess
capital to share owners in the form of dividends or share buy-backs.  In 2002
the Group increased its equity interests, at a combined initial cost of £105
million in cash, in advertising and media investment management in the United
Kingdom, France, Germany, Spain, the Netherlands, Switzerland, Sweden, Finland,
the Czech Republic, Slovakia, Australia, New Zealand, China, India, Taiwan,
Brazil and the Middle East; in information and consultancy in the United States,
Ireland, France, Poland and Thailand; in public relations and public affairs in
the United States, Norway, China, Australia, Japan and Taiwan; in direct and
promotion in the United States; and in sports marketing in Germany.



As noted above, your Board has decided to increase the final dividend by 20% to
3.67p per share, taking the full year dividend to 5.40p per share which is four
and a half times covered, at the headline earnings level.  In addition, as
current opportunities for cash acquisitions may be limited particularly in the
United States, the Company will continue to commit to repurchasing up to 2% of
its share base in the open market, when market conditions are appropriate.  Such
annual rolling share repurchases are perceived to have a more significant impact
in improving share owner value than sporadic buy-backs.



In light of recent stock market declines and consequent poor equity investment
returns, the Company has reduced its forecasted weighted average return on
United States pension assets from 9.1% to 7.2% and on United Kingdom pension
assets from 5.8% to 5.4%.  Our advisers indicate that further average cash
contributions of approximately £12 to £13 million per annum would be necessary
to fully fund all funded pension schemes over their remaining lives, unless
stock markets recover.



Developments in 2002



Including associates, the Group had over 62,000 full-time people in over 1,400
offices in 103 countries at the year end.  It services over 300 of the Fortune
Global 500 companies, over one-half of Nasdaq 100, over 30 of the Fortune e-50,
and approximately 333 national or multi-national clients in three or more
disciplines.  More than 130 clients are served in four disciplines and these
clients account for over 50% of Group revenues.  The Group also works with over
100 clients in six or more countries.



These statistics reflect the increasing opportunities for developing client
relationships between activities nationally, internationally and by function.
The Group estimates that at least 20% of new assignments in the year were
generated through the joint development of opportunities by two or more Group
companies.  New integration mechanisms, including WPP client co-ordinators and
country managers, are being developed.



Future prospects



Given the current state of the world economy, your Group has performed
reasonably well. In essence, operating costs, including severance and
restructuring costs, have been reduced following the significant fall in
like-for-like revenues.  As the Group forecasted the general decline in economic
conditions relatively early, the consequent focus on matching staff costs to
revenues has resulted in a fall in average headcount by over 8% and
point-to-point headcount by over 6%.  This has been achieved, in part, by a
slowdown in recruitment and the impact of the normal attrition rate.



With the recession, the task of eliminating under-utilised property costs
continue to be a priority.  At the beginning of 2002 the Group occupied
approximately 14 million square feet worldwide.  By the end of the year,
occupancy had fallen to 13.5 million square feet or a 4% reduction.  In
addition, as a result of actions already taken, a further 1.1 million square
feet or an additional 8% will be jettisoned by the end of 2003.



As usual and given conditions in 2002, our budgets for 2003 have been prepared
on a conservative basis, largely excluding new business particularly in
advertising and media investment management.  They predict broadly flat
like-for-like revenues in comparison to 2002 and a stronger second half of the
year relative to the first.  They also indicate advertising and media investment
management revenues up by 1%, counterbalanced by flat marketing services
revenues.  We only have actual data for January in 2003, and this shows revenue
marginally above budget and like-for-like revenues down 1% on last year.
Estimated net new business billings so far in 2003 were very strong with almost
$750 million of net wins according to trade publications.



Worldwide economic conditions are likely to remain difficult in 2003
particularly given the uncertainty created by the prospect of a war in Iraq.  A
bath-shaped or saucer-shaped recovery, where the upturn is gradual still seems
most likely, although the bath does seem to have deep corrugations.  The economy
still seems to be paying the price for the over-expansion of the late nineties.
Should conditions improve, the Group is well positioned to respond to any
recovery, given its geographical and functional spread and strengths, its
flexible cost structure and strong cash flow.



In the short-term, therefore, growth in advertising and marketing services
expenditure will likely remain fairly flat or low, particularly given
procurement pressures and the dampening effect of the increasing proportion of
fee remuneration on the impact of cyclical upturns (and downturns).   However,
there are now significant opportunities in the area of outsourcing clients'
marketing activities, consolidating client budgets and capitalising on
competitive weaknesses. In addition, spending amongst the package goods,
pharmaceutical, oil and energy, government (the government is the largest
advertiser in the UK market) and price-value retail sectors has remained
relatively resilient.  These sectors represent approximately 27% of the Group's
revenue.



In the long-term, however, the outlook is very favourable.  Overcapacity of
production in most sectors and the shortage of human capital, the developments
in new technologies and media, the growth in importance of internal
communications, the continued dominance of the United States economy and the
need to influence distribution, underpin the need for our clients to continue to
differentiate their products and services both tangibly and intangibly.
Advertising and marketing services expenditure as a proportion of gross national
product should resume its growth and once more bust through the cyclical high
established in 2000.



Given these short-term and long-term trends, your Company has three strategic
priorities.  In the short-term, to weather the recession; in the medium-term to
continue to integrate successfully the mergers with Y&R and Tempus; and finally,
in the long-term, to continue to develop its businesses in the faster growing
geographical areas of Asia Pacific, Latin America, Central and Eastern Europe,
Africa and the Middle East and in the faster growing functional areas of
marketing services, particularly direct, interactive and market research.



Incentive plans for 2003 will again focus more on operating profit growth than
historically to stimulate top-line growth, although objectives will continue to
include operating margin improvement, improvement in staff costs to revenue
ratios and qualitative group objectives, including co-ordination, talent
management and succession planning.



In these circumstances there is no reason to believe that the Group cannot
achieve the revised objective set in 2002 of improving margins by up to another
one margin point in 2003 with the potential for a further half of one margin
point improvement in 2004.  Your Board does not believe that there is any
functional, geographic, account concentration or structural reasons that should
prevent the Group achieving operating margins of up to 13.8% by 2004.  After
all, the best listed performer in the industry is or has been at 15-16% and that
is where we would want to be.  Neither is there any reason why operating margins
could not be improved beyond this level by continued focus on revenue growth and
careful husbandry of costs.  Our ultimate objective continues to be to achieve
20% margins over a period of time and improving the return on capital employed.



Increasingly, WPP is concentrating on its mission of the "management of the
imagination", and ensuring it is a big company with the heart and mind of a
small one.  To aid the achievement of this objective and to develop the benefits
of membership of the Group for both clients and our people, the parent company
continues to develop its activities in the areas of human resources, property,
procurement, information technology and practice development.  Ten
practice areas which span all our brands have been developed initially in media
investment management, healthcare, privatisation, new technologies, new faster
growing markets, internal communications, retailing, entertainment and media,
financial services and hi-tech and telecommunications.



2002 was a very difficult year.  2003 will also be difficult but hopefully a
little easier.  Early indications are that worldwide advertising and marketing
services expenditure will be up slightly.  2004 may well be better.



Our people have responded magnificently in 2002 to the difficult economic and
political challenges that they have faced.  They have delivered results which,
even including all exceptional items, have out-performed most of their
competition and grown market share.



We believe that despite the challenges that we face, 2003, WPP's eighteenth
year, should be a good one.



Further information:


Sir Martin Sorrell                           )
Paul Richardson                              )      (44) 207 408 2204
Feona McEwan                                 )

Fran Butera                                           (1) 212 632 2235





Share owner web-site - www.wppinvestor.com





This press release may contain forward-looking statements within the meaning of
the federal securities laws.   These statements are subject to risks and
uncertainties that could cause actual results to differ materially including
adjustments arising from the annual audit by management and the company's
independent auditors.   For further information on factors which could impact
the company and the statements contained herein, please refer to public filings
by the company with the Securities and Exchange Commission.   The statements in
this press release should be considered in light of these risks and
uncertainties.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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