Interim Results - PART 2

WPP Group PLC 20 August 2002 PART 2 WPP GROUP PLC Appendix I Unaudited consolidated interim results for the six months ended 30 June, 2002 Six Six Notes months months Constant Year ended 30 ended 30 Currency Ended June2002 June2001 +/(-) +/(-) 31 December Restated (2) 2001 £m £m % % £m (note 3) Turnover (gross billings) 8,779.9 8,961.0 (2.0)% (0.4)% 20,886.9 Revenue 4 1,959.8 1,997.0 (1.9)% (0.3)% 4,021.7 Gross profit 1,849.1 1,889.5 (2.1)% (0.6)% 3,789.7 Operating costs: Operating costs excluding goodwill (1,611.0) (1,625.8) 0.9% 0.7% (3,269.4) Goodwill amortisation and impairment 8 (36.7) (4.8) (664.6)% (719.2)% (14.8) Total operating costs (1,647.7) (1,630.6) (1.0)% (2.7)% (3,284.2) Operating profit 201.4 258.9 (22.2)% (21.5)% 505.5 Income from associates 15.8 21.0 (24.8)% (22.3)% 40.8 Profit on ordinary activities before interest, taxation, investment gains and write-downs 217.2 279.9 (22.4)% (21.5)% 546.3 Net gain on disposal of investments - - - - 6.8 Amounts written off fixed asset investments - - - - (70.8) Net interest payable and similar charges (43.5) (32.1) (35.5)% (38.8)% (71.3) Profit on ordinary activities before taxation 173.7 247.8 (29.9)% (29.3)% 411.0 Tax on profit on ordinary activities 5 (53.4) (74.3) 28.1% 36.4% (126.1) Profit on ordinary activities after taxation 120.3 173.5 (30.7)% (26.3)% 284.9 Minority interests (6.0) (6.2) 3.2% 3.2% (13.7) Profit attributable to ordinary share owners 114.3 167.3 (31.7)% (27.1)% 271.2 Ordinary dividends 6 (20.0) (16.4) 22.0% 22.0% (51.6) Retained profit for the period 94.3 150.9 (37.5)% (32.7)% 219.6 PBIT(1) 4 253.9 284.7 (10.8)% (9.4)% 561.1 PBIT(1) margin 13.0% 14.3% 14.0% PBT(1) 210.4 252.6 (16.7)% (15.5)% 489.8 Headline earnings per share (3) Basic earnings per ordinary share 7 13.6p 15.7p (13.4)% (8.5)% 31.8p Diluted earnings per ordinary share 7 13.2p 15.0p (12.0)% (7.0)% 30.6p Standard earnings per share Basic earnings per ordinary share 7 10.3p 15.3p (32.7)% (28.3)% 24.6p Diluted earnings per ordinary share 7 10.0p 14.6p (31.5)% (26.9)% 23.7p Headline earnings per ADR (3),(4) Basic earnings per ADR $0.98 $1.13 (13.3)% (8.5)% $2.29 Diluted earnings per ADR $0.95 $1.08 (12.0)% (7.0)% $2.20 Standard earnings per ADR (4) Basic earnings per ADR $0.74 $1.10 (32.7)% (28.3)% $1.77 Diluted earnings per ADR $0.72 $1.05 (31.4)% (26.9)% $1.71 (1) PBIT: profit on ordinary activities before interest and taxation, excluding goodwill amortisation and impairment, investment gains and write downs. PBT: profit on ordinary activities before taxation, excluding goodwill amortisation and, impairment, investment gains and write downs. (2) The profit and loss account for the six months ended 30 June 2001 has been restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. (3) Headline earnings per ordinary share and ADR exclude goodwill amortisation and impairment, investment gains and write downs. (4) These figures have been translated for convenience purposes only, using the profit and loss exchange rates shown in Note 3. WPP GROUP PLC Unaudited summary interim consolidated cash flow statement for the six months ended 30 June, 2002 Six months ended Six months ended Year ended 30 June 30 June 31 December 2002 2001 2001 Restated (1) £m £m £m Reconciliation of operating profit to net cash inflow/(outflow) from operating activities: Operating profit 201.4 258.9 505.5 Depreciation, amortisation and impairment charges 96.2 58.7 124.7 Movements in working capital (199.7) (295.8) (166.4) Movements in provisions, other debtors and creditors (52.8) (199.8) (289.9) Net cash inflow/(outflow) from operating activities 45.1 (178.0) 173.9 Dividends received from associates 4.4 5.0 14.7 Returns on investments and servicing of finance (48.5) (30.5) (56.4) United Kingdom and overseas tax paid (43.6) (34.9) (77.5) Purchase of tangible fixed assets (34.0) (62.1) (118.1) Purchase of own shares by ESOP Trust (67.9) (69.7) (103.3) Other movements 1.8 1.6 4.2 Capital expenditure and financial investment (100.1) (130.2) (217.2) Cash consideration for acquisitions (202.1) (282.2) (692.8) Cash/(overdrafts) acquired 58.0 18.4 (21.1) Purchases of other investments (2.0) (5.2) (43.2) Proceeds from disposal of other investments 3.3 - 26.8 Total acquisitions (142.8) (269.0) (730.3) Equity dividends paid - - (44.4) Net cash outflow before management of liquid resources and financing (285.5) (637.6) (937.2) Management of liquid resources 43.7 (202.5) (76.8) Financing Repayment of drawings on bank loans (116.2) (262.1) (175.3) Eurobond issue proceeds - 614.1 614.1 Convertible bond issue proceeds 450.0 - - Financing costs (9.0) - (8.8) Proceeds from issue of shares 20.5 46.0 69.0 Net cash inflow from financing 345.3 398.0 499.0 Increase/(decrease) in cash and overdrafts for the period 103.5 (442.1) (515.0) Translation difference 6.1 8.8 10.7 Balance of cash and overdrafts at beginning of period 265.7 770.0 770.0 Balance of cash and overdrafts at end of period 375.3 336.7 265.7 Reconciliation of net cash flow to movement in net debt: Increase/(decrease) in cash and overdrafts for the period 103.5 (442.1) (515.0) Cash (inflow)/outflow from increase in liquid (43.7) 202.5 76.8 resources Cash inflow from debt financing (324.9) (351.9) (430.0) Other movements (3.9) (0.2) (1.1) Translation difference (6.1) (3.8) 8.8 Movement of net debt in the period (275.1) (595.5) (860.5) Net debt at beginning of period (885.1) (24.6) (24.6) Net debt at end of period (Note 11) (1,160.2) (620.1) (885.1) (1) Restated as a result of the implementation of FRS 17 (Retirement Benefits) in the Group's 2001 financial statements. WPP GROUP PLC Unaudited consolidated balance sheet as at 30 June, 2002 30 June 30 June 31 December Notes 2002 2001 2001 Restated (1) £m £m £m Fixed assets Intangible assets: Corporate brands 950.0 950.0 950.0 Goodwill 8 4,452.2 3,665.3 4,439.9 5,402.2 4,615.3 5,389.9 Tangible assets 396.9 421.6 432.8 Investments 8 635.8 638.9 553.5 6,434.9 5,675.8 6,376.2 Current assets Stocks and work in progress 328.5 332.5 236.9 Debtors 2,420.2 2,298.5 2,391.8 Debtors within working capital facility: Gross debts 409.5 422.4 331.0 Non-returnable proceeds (229.1) (245.0) (82.5) 180.4 177.4 248.5 Current asset investments 33.1 202.5 76.8 Cash at bank and in hand 690.6 581.1 585.6 3,652.8 3,592.0 3,539.6 Creditors: amounts falling due within one year 9 (4,038.8) (4,006.8) (4,322.0) Net current liabilities (386.0) (414.8) (782.4) Total assets less current liabilities 6,048.9 5,261.0 5,593.8 Creditors: amounts falling due after more than one year (including convertible loan notes) 10 (2,016.6) (1,555.2) (1,711.5) Provisions for liabilities and charges (106.5) (94.4) (106.1) Net assets excluding pension provision 3,925.8 3,611.4 3,776.2 Pension provision 2 (135.3) (87.7) (135.3) Net assets including pension provision 3,790.5 3,523.7 3,640.9 Capital and reserves Called up share capital 115.6 113.8 115.0 Reserves 3,629.6 3,382.0 3,484.8 Equity share owners' funds 3,745.2 3,495.8 3,599.8 Minority interests 45.3 27.9 41.1 Total capital employed 3,790.5 3,523.7 3,640.9 (1) The balance sheet at 30 June 2001 has been restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. WPP GROUP PLC Unaudited statement of consolidated total recognised gains and losses for the period ended 30 June, 2002 Six months ended Six months ended Year ended 30 June 2002 30 June 2001 31 December 2001 Restated (1) £m £m £m Profit for the period 114.3 167.3 271.2 Exchange adjustments on foreign currency net investments 29.8 (62.9) (80.6) Actuarial loss on defined benefit pension schemes in accordance with FRS 17 (Retirement benefits) - - (43.0) Total recognised gains and losses relating to the period 144.1 104.4 147.6 Prior year adjustment on implementation of FRS 17 (Retirement Benefits) - (2.6) (2.6) Total gains and losses recognised during the 144.1 101.8 145.0 period Unaudited reconciliation of movements in consolidated share owners' funds for the period ended 30 June, 2002 Six months ended Six months ended Year ended 30 June 2002 30 June 2001 31 December 2001 Restated (1) £m £m £m Profit for the period 114.3 167.3 271.2 Ordinary dividends payable (20.0) (16.4) (51.6) 94.3 150.9 219.6 Exchange adjustments on foreign currency net investments 29.8 (62.9) (80.6) Ordinary shares issued in respect of 0.5 - 64.7 acquisitions Share issue costs charged to merger reserve - - (1.0) Other share issues 20.8 37.9 68.2 Actuarial loss on defined benefit schemes - - (43.0) Write back of goodwill on disposal of interest in associate undertaking - - 2.0 Net additions to share owners' funds 145.4 125.9 229.9 Opening share owners' funds 3,599.8 3,369.9 3,369.9 Closing share owners' funds 3,745.2 3,495.8 3,599.8 (1) Both the statement of consolidated recognised gains and losses and reconciliation of movements in consolidated share owners' funds, for the six months ended 30 June 2001, have been restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. WPP GROUP PLC Notes to the unaudited consolidated interim financial statements (Notes 1-12) 1. Basis of accounting The unaudited consolidated interim financial statements are prepared under the historical cost convention. 2. Accounting policies The unaudited consolidated interim financial statements comply with relevant accounting standards and have been prepared using accounting policies set out on pages 58 and 59 of the Group's 2001 Annual Report and Accounts. The policies set out in the 2001 Annual Report and Accounts are in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). FRS 17 "Retirement benefits" As disclosed in the 2001 Annual Report and Accounts, the Group accounts for pension costs and retirement benefits in accordance with FRS 17. This requires an annual actuarial assessment of the defined benefit pension schemes, which is carried out by the Group's independent actuarial advisers. In the six months ended 30 June 2002 the Group has charged the profit and loss account with £7.1 million of service cost and £2.5 million of notional interest in respect of defined benefit schemes on the basis of the 2001 actuarial assessment. This will be updated during the second half of the year, and any actuarial gains and losses arising on pension assets and liabilities in the balance sheet will be shown in the statement of total recognised gains and losses for 2002. Statutory information and audit review The results for the six months to 30 June 2002 and 2001 do not constitute statutory accounts. The statutory accounts for the year ended 31 December 2001 received an unqualified auditors' report and have been filed with the Registrar of Companies. The interim financial statements are unaudited but have been reviewed by the auditors and their report to the directors is set out on page 20. 3. Currency conversion The 2002 unaudited consolidated interim profit and loss account is prepared using, among other currencies, an average exchange rate of US$1.4441 to the pound (period ended 30 June, 2001: US$1.4397; year ended 31 December, 2001 US$1.4401). The unaudited consolidated interim balance sheet as at 30 June, 2002 has been prepared using the exchange rate on that day of US$1.5279 to the pound (period ended 30 June, 2001: US$1.4116; year ended 31 December, 2001: US$1.4542). The unaudited consolidated interim profit and loss account and balance sheet are presented in Euros in Appendix II for illustrative purposes. The unaudited consolidated interim profit and loss account has been prepared using an average exchange rate of Euro1.6096 to the pound (period ended 30 June, 2001: Euro1.6042; year ended 31 December 2001: Euro1.6086). The unaudited consolidated interim balance sheet at 30 June, 2002 has been prepared using the exchange rate on that day of Euro1.5435 to the pound (period ended 30 June, 2001: Euro1.6659; year ended 31 December, 2001: Euro1.6322). The constant currency percentage changes shown on the face of the profit and loss account have been calculated by applying 2002 exchange rates to the results for 2001 and 2002 for both the Sterling and Euro financial statements. WPP GROUP PLC 4. Segmental Analysis Reported contributions by geographical area were as follows: 30 June 30 June 31 December 2002 2001 2001 Restated (2) £m £m £m Revenue United Kingdom 312.2 300.4 627.3 United States 855.1 917.2 1,763.1 Continental Europe 444.2 412.3 870.9 Canada, Asia Pacific, Latin America, Africa & Middle East 348.3 367.1 760.4 1,959.8 1,997.0 4,021.7 PBIT(1) United Kingdom 39.1 39.4 73.9 United States 140.4 154.2 257.6 Continental Europe 41.9 47.7 119.7 Canada, Asia Pacific, Latin America, Africa & Middle East 32.5 43.4 109.9 253.9 284.7 561.1 Reported contributions by operating sector were as follows: 30 June 30 June 31 December 2002 2001 2001 Restated(2) £m £m £m Revenue Advertising and media investment management 896.0 914.0 1,841.5 Information and consultancy 298.4 281.9 590.3 Public relations and public affairs 232.9 264.5 502.1 Branding and identity, healthcare and specialist communications 532.5 536.6 1,087.8 1,959.8 1,997.0 4,021.7 PBIT(1) Advertising and media investment management 140.3 158.1 319.4 Information and consultancy 22.8 27.2 57.6 Public relations and public affairs 27.8 28.9 48.3 Branding and identity, healthcare and specialist communications 63.0 70.5 135.8 253.9 284.7 561.1 (1) PBIT: Profit on ordinary activities before interest, taxation, goodwill amortisation and impairment, investment gains and write downs. (2) PBIT has been restated following the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. The impact of this restatement on PBIT is to increase PBIT in the period ended 30 June 2001 from £282.6 million to £284.7 million. 5. Taxation The Group tax rate on profit on ordinary activities before taxation, impairment and investment gains is 27% (30 June, 2001: 30%; year ended 31 December, 2001: 28%). The tax charge comprises: Six months Six months Year ended ended ended 31 December 30 June 2002 30 June 2001 2001 £m £m £m Total current tax 47.6 65.9 122.1 Total deferred tax - - (5.5) Share of associates tax 5.8 8.4 16.4 53.4 74.3 133.0 Tax on investment gains - - (6.9) Total tax on profits 53.4 74.3 126.1 6. Ordinary Dividends The Board has recommended an interim dividend of 1.73p (2000: 1.44p) per ordinary share. This is expected to be paid on 18 November 2002 to share owners on the register at 13 September 2002. 2002 2001 Ordinary dividend per share - interim 1.73p 1.44p final - 3.06p Ordinary dividend per ADR- interim 12.5c 10.4c final - 22.0c 7. Earnings per Share Basic and diluted earnings per share have been calculated in accordance with FRS14 "Earnings per Share". (a) Headline basic earnings per share have been calculated using earnings of £114.3 million (period ended 30 June 2001: £167.3 million; year ended 31 December 2001: £271.2 million), and adjusted for goodwill amortisation and impairment, investment gains and write downs of £36.7 million (period ended 30 June 2001: £4.8 million; year ended 31 December 2001: £78.8 million). The weighted average number of shares in issue for the six months to 30 June 2002 was 1,112,746,764 shares (period ended 30 June 2001; 1,095,532,290 shares; year ended 31 December 2001: 1,101,937,750 shares). (b) Headline diluted earnings per share have been calculated using earnings of £114.3 million (period ended 30 June 2001: £167.3 million; year ended 31 December 2001: £271.2 million) and adjusted for goodwill amortisation and impairment, investment gains and write downs of £36.7 million (period ended 30 June 2001: £4.8 million; year ended 31 December 2001: £78.8 million). The weighted average number of shares used was 1,141,408,177 shares (period ended 30 June 2001: 1,157,794,496 shares, year ended 31 December 2001: 1,157,080,255 shares). This takes into account the exercise of employee share options where these are expected to dilute earnings and convertible debt. For the six months ended 30 June 2002 both the $287.5 million convertible loan note and the £450 million convertible bond were accretive to earnings and therefore excluded from the calculation. For the six months ended 30 June 2001 and the year ended 31 December 2001 the $287.5 million convertible bond was dilutive and earnings were consequently adjusted by £1.8 million and £3.6 million respectively for the purposes of this calculation. (c) Standard basic earnings per share have been calculated using earnings of £114.3 million (period ended 30 June 2001: £167.3 million; year ended 31 December 2001: £271.2 million) and weighted average shares in issue during the period of 1,112,746,764 shares (period ended 30 June 2001; 1,095,532,290 shares; year ended 31 December 2001: 1,101,937,750 shares). (d) Standard diluted earnings per share have been calculated using earnings of £114.3 million (period ended 30 June 2001: £167.3 million; year ended 31 December 2001: £271.2 million). The weighted average number of shares used was 1,141,408,177 shares (period ended 30 June 2001: 1,157,794,496 shares; year ended 31 December 2001: 1,157,080,255 shares). This takes into account the exercise of employee share options where these are expected to dilute earnings and convertible debt. For the six months ended 30 June 2002 both the $287.5 million convertible loan note and the £450 million convertible bond were accretive to earnings and therefore excluded from the calculation. For the six months ended 30 June 2001 and the year ended 31 December 2001 the $287.5 million convertible bond was dilutive and earnings were consequently adjusted by £1.8 million and £3.6 million respectively for the purposes of this calculation (e) At 30 June 2002 there were 1,156,151,790 ordinary shares in issue. 8. Goodwill and acquisitions During the period, the Group charged £12.7 million (30 June 2001: £4.8 million and 31 December 2001: £14.8 million) of goodwill amortisation and £24.0 million (30 June 2001: £Nil and 31 December 2001: £Nil) of impairment to the profit and loss account, a total of £36.7 million. The impairment charge relates to a number of first generation businesses in the branding and identity, healthcare and specialist communications sector, which in the current economic climate are under performing. The Directors will reassess the need for any further impairment write downs at the year end. The directors continue to assess the useful life of goodwill arising on acquisitions. Gross goodwill of £415.3 million is subject to amortisation over periods of up to 20 years. Goodwill on subsidiary undertakings increased by £12.3 million in the period. This includes both goodwill arising on acquisitions completed in the period ended 30 June 2002 and also reforecasts to goodwill relating to acquisitions completed in prior periods. Acquisitions of associate undertakings gave rise to a further £2.5 million of goodwill, which is included in investments. These acquisitions do not have a significant impact on the Group's results for the six months to 30 June 2002. Cash paid in respect of acquisitions was £202.1 million (period ended 30 June, 2001: £282.2 million and year ended 31 December 2001: £692.8 million). This includes initial cash consideration and payment of consideration resulting from acquisitions in prior years. Future anticipated payments to vendors in respect of earnouts, totalled £227.9 million (30 June, 2001: £254.3 million; 31 December 2001: £288.2 million), based on the directors' best estimates of future obligations, which are dependent on the future performance of the interests acquired and assume the operating companies improve profits in line with directors' estimates. 9. Creditors: amounts falling due within one year The following are included in creditors falling due within one year: 30 June 30 June 31 December 2002 2001 2001 £m £m £m Bank loans and overdrafts 350.2 316.4 319.9 Trade creditors 2,353.9 2,361.3 2,506.2 Corporate income tax payable 47.7 74.1 51.3 Deferred income 301.8 266.2 322.2 Earnouts (note 8) 59.0 70.6 103.1 Other creditors and accruals 926.2 918.2 1,019.3 4,038.8 4,006.8 4,322.0 Overdraft balances included within bank loans and overdrafts amount to £315.3 million (30 June, 2001: £244.4 million; 31 December, 2001: £319.9 million). 10. Creditors: amounts falling due after more than one year The following are included in creditors falling due after more than one year: 30 June 30 June 31 December 2002 2001 2001 £m £m £m Corporate bonds, convertible loan notes and bank loans 1,533.7 1,087.3 1,227.6 Corporate income taxes payable 227.4 217.8 222.2 Earnouts (note 8) 168.9 183.7 185.1 Other creditors and accruals 86.6 66.4 76.6 2,016.6 1,555.2 1,711.5 The following table sets out the directors' best estimates of future earnout related obligations: Within 1 year 1 - 2 years 3 - 5 years Over 5 years Total £59.0m £57.5m £98.6m £12.8m £227.9m The corporate bonds, convertible loan notes, bank loans and overdrafts included within short and long term creditors fall due for repayment as follows: 30 June 30 June 31 December 2002 2001 2001 £m £m £m Within one year 350.2 316.4 319.9 Between 1 and 2 years 227.6 74.9 221.7 Between 3 and 5 years 824.5 553.8 546.0 Over 5 years 481.6 458.6 459.9 1,883.9 1,403.7 1,547.5 11. Net debt 30 June 30 June 31 December 2002 2001 2001 £m £m £m Cash at bank and in hand 690.6 581.1 585.6 Current asset investments 33.1 202.5 76.8 Bank loans and overdrafts due within one year (note 9) (350.2) (316.4) (319.9) Corporate bond and loans due after one year (note 10) (1,533.7) (1,087.3) (1,227.6) Net debt (1,160.2) (620.1) (885.1) During the period, the Group completed the issue of £450 million of 2% convertible bonds due April 2007. Net proceeds of the offering were used to reduce drawings on credit facilities. 12. Contingent liabilities in respect of option agreements WPP has entered into agreements with certain shareowners of partially owned subsidiaries and associate companies to acquire additional equity interests. These agreements typically contain options requiring WPP to purchase their shares at specified times up to 2009 on the basis of average earnings both before and after the exercise of the option. All arrangements contain clauses that cap the maximum amount payable by WPP. The table below shows the illustrative amounts that would be payable by WPP in respect of these options, on the basis of the relevant companies' current financial performance, if all the options had been exercised at 30 June 2002. Currently Not Currently TOTAL Exercisable Exercisable £m £m £m Subsidiaries 7.5 24.6 32.1 Associates 18.4 9.3 27.7 Total 25.9 33.9 59.8 13. Share options - illustrative charge Appendix III illustrates the impact on WPP were it to adopt an approach to expensing the weighted average fair value of options consistent with current United States transitional guidelines contained within FAS 123, adopting a Black Scholes valuation model. This would give rise to a charge to operating profit of £1.3million (£0.9 million after taxation) for the period ended 30 June 2002 in respect of executive share options granted in 2002. On a proforma basis, had WPP adopted a policy of charging the weighted average fair value of options to the profit and loss account over the vesting period of each options grant, adopting a Black Scholes basis of valuation, then the resulting charge to operating profit would be £10.0 million (£7.0 million after taxation or 5% of headline earnings) for the six months ended 30 June 2002, £6.3 million (£4.4 million after taxation or 5% of headline earnings) for the six months ended 30 June 2001, and £14.2 million (£9.9 million after taxation or 5% of headline earnings) for the year ended 31 December 2001. The following assumptions have been made in determining the fair value of options granted in the year: UK Risk-free rate 5.19% US Risk-free rate 4.20% Expected life 48 months Expected volatility 45% Dividend yield 0.6% INDEPENDENT REVIEW REPORT TO WPP GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2002 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of total recognised gains and losses, and reconciliation of movements in consolidated share owners' funds and related notes 1 - 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reason for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2002. Deloitte & Touche Chartered Accountants London 20 August 2002 WPP GROUP PLC Appendix II Unaudited consolidated profit & loss account for the six months ended 30 June, 2002 Presented in Euros for illustrative purposes only Six months ended Six months ended Year ended 30 June 2002 30 June 2001 31 December 2001 Restated(2) Euro m Euro m Euro m Turnover (gross billings) 14,132.1 14,375.2 33,598.7 Revenue 3,154.5 3,203.6 6,469.3 Gross profit 2,976.3 3,031.1 6,096.1 Operating costs: Operating costs excluding goodwill (2593.0) (2,608.1) (5,259.2) Goodwill amortisation and impairment (59.1) (7.7) (23.8) Total operating costs (2,652.1) (2,615.8) (5,283.0) Operating profit 324.2 415.3 813.1 Income from associates 25.4 33.7 65.6 Profit on ordinary activities before interest, taxation, investment gains and write-downs 349.6 449.0 878.7 Net gain on disposal of investments - 10.9 Amounts written off fixed asset investments - (113.9) Net interest payable and similar charges (70.0) (51.5) (114.7) Profit on ordinary activities before taxation 279.6 397.5 661.0 Tax on profit on ordinary activities (85.9) (119.2) (202.8) Profit on ordinary activities after 193.7 278.3 458.2 taxation Minority interests (9.7) (9.9) (22.0) Profit attributable to ordinary share owners 184.0 268.4 436.2 Ordinary dividends (32.2) (26.3) (83.0) Retained profit for the period 151.8 242.1 353.2 PBIT(1) 408.7 456.7 902.5 PBIT(1) margin 13.0% 14.3% 14.0% PBT(1) 338.7 405.2 787.8 Headline earnings per share (3) Basic earnings per ordinary share 21.9c 25.2c 51.2c Diluted earnings per ordinary share 21.2c 24.1c 49.2c Standard earnings per share Basic earnings per ordinary share 16.6c 24.5c 39.6c Diluted earnings per ordinary share 16.1c 23.4c 38.1c (1) PBIT: profit on ordinary activities before interest and taxation, excluding goodwill amortisation and impairment, investment gains and write downs. PBT: profit on ordinary activities before taxation, excluding goodwill amortisation and impairment, investment gains and write downs. (2) The profit and loss account for the six months ended 30 June 2001 has been restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. (3) Headline earnings per ordinary share and ADR exclude goodwill amortisation and impairment, investment gains and write downs. WPP GROUP PLC Unaudited consolidated balance sheet as at 30 June, 2002 Presented in Euros for illustrative purposes only 30 June 2002 30 June 2001 31 December 2001 Restated(1) Euro m Euro m Euro m Fixed assets Intangible assets: Corporate brands 1,466.3 1,582.6 1,550.6 Goodwill 6,872.0 6,106.0 7,246.8 8,338.3 7,688.6 8,797.4 Tangible assets 612.6 702.3 706.4 Investments 981.4 1,064.3 903.4 9,932.3 9,455.2 10,407.2 Current assets Stocks and work in progress 507.0 553.9 386.7 Debtors 3,735.6 3,829.1 3,903.9 Debtors within working capital facility: Gross debts 632.1 703.7 540.3 Non-returnable proceeds (353.6) (408.1) (134.7) 278.5 295.6 405.6 Current asset investments 51.1 337.3 125.4 Cash at bank and in hand 1,065.9 968.1 955.8 5,638.1 5,984.0 5,777.4 Creditors: amounts falling due within one year (6,233.9) (6,674.9) (7,054.4) Net current liabilities (595.8) (690.9) (1,277.0) Total assets less current liabilities 9,336.5 8,764.3 9,130.2 Creditors: amounts falling due after more than one year (including convertible loan note) (3,112.6) (2,590.8) (2,793.5) Provisions for liabilities and charges (164.4) (157.3) (173.2) Net assets excluding pension provision 6,059.5 6,016.2 6,163.5 Pension provision (208.9) (146.1) (220.8) Net assets including pension provision 5,850.6 5,870.1 5,942.7 Capital and reserves Called up share capital 178.4 189.6 187.7 Reserves 5,602.3 5,634.1 5,687.9 Equity share owners' funds 5,780.7 5,823.7 5,875.6 Minority interests 69.9 46.54 67.1 Total capital employed 5,850.6 5,870.1 5,942.7 (1) Restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements Appendix III To present the impact of US transitional guidelines on the expensing of share options, for illustrative purposes only Unaudited pro forma consolidated profit and loss account for the six months ended 30 June, 2002 Six months Six months Year ended 30 ended 30 Ended June 2002 June 2001 31 December Restated (2) 2001 £m £m £m Turnover (gross billings) 8,779.9 8,961.0 20,886.9 Revenue 1,959.8 1,997.0 4,021.7 Gross profit 1,849.1 1,889.5 3,789.7 Operating costs: Operating costs excluding options and goodwill (1,611.0) (1,625.8) (3,269.4) Fair value of share options (1.3) - - Goodwill amortisation and impairment (36.7) (4.8) (14.8) Total operating costs (1,649.0) (1,630.6) (3,284.2) Operating profit 200.1 258.9 505.5 Income from associates 15.8 21.0 40.8 Profit on ordinary activities before interest, taxation, investment gains and write-downs 215.9 279.9 546.3 Net gain on disposal of investments - - 6.8 Amounts written off fixed asset investments - - (70.8) Net interest payable and similar charges (43.5) (32.1) (71.3) Profit on ordinary activities before taxation 172.4 247.8 411.0 Tax on profit on ordinary activities (53.0) (74.3) (126.1) Profit on ordinary activities after taxation 119.4 173.5 284.9 Minority interests (6.0) (6.2) (13.7) Profit attributable to ordinary share owners 113.4 167.3 271.2 Ordinary dividends (20.0) (16.4) (51.6) Retained profit for the period 93.4 150.9 219.6 PBIT(1) 252.6 284.7 561.1 PBIT(1) margin 12.9% 14.3% 14.0% PBT(1) 209.1 252.6 489.8 Headline earnings per share (3) Basic earnings per ordinary share 13.5p 15.7p 31.8p Diluted earnings per ordinary share 13.1p 15.0p 30.6p Standard earnings per share Basic earnings per ordinary share 10.2p 15.3p 24.6p Diluted earnings per ordinary share 9.9p 14.6p 23.7p Headline earnings per ADR(3),(4) Basic earnings per ADR $0.97 $1.13 $2.29 Diluted earnings per ADR $0.95 $1.08 $2.20 Standard earnings per ADR (4) Basic earnings per ADR $0.74 $1.10 $1.77 Diluted earnings per ADR $0.71 $1.05 $1.71 (1) PBIT: profit on ordinary activities before interest and taxation, excluding goodwill amortisation and impairment, investment gains and write downs. PBT: profit on ordinary activities before taxation, excluding goodwill amortisation and impairment, investment gains and write downs. (2) The profit and loss account for the six months ended 30 June 2001 has been restated as a result of the implementation of FRS17 (Retirement Benefits) in the Group's 2001 financial statements. (3) Headline earnings per ordinary share and ADR exclude goodwill amortisation and impairment, investment gains and write downs. (4) These figures have been translated for convenience purposes only, using the profit and loss exchange rates shown in Note 3. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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