Interim Results - Part 2
WPP Group PLC
17 August 2007
Appendix I
WPP GROUP PLC
Interim results for the six months ended 30 June 2007
Unaudited consolidated interim income statement
for the six months ended 30 June 2007
------ ---------- --------- ------- -------- ----------
Six months Six months Year
ended ended ended
30 June 30 June Constant 31 December
Notes 2007 2006 Currency* 2006
------------------ ------ ---------- --------- ------- -------- ----------
£m £m +/(-)% +/(-)% £m
Billings 15,084.6 14,407.1 4.7 10.1 30,140.7
================== ====== ========== ========= ======= ======== ==========
Revenue 2,921.0 2,864.4 2.0 7.7 5,907.8
Direct costs (151.3) (149.2) (1.4) (6.2) (296.8)
------------------ ------ ---------- --------- ------- -------- ----------
Gross profit 2,769.7 2,715.2 2.0 7.8 5,611.0
Operating costs 4 (2,450.2) (2,407.3) (1.8) (7.6) (4,869.4)
------------------ ------ ---------- --------- ------- -------- ----------
Operating profit 319.5 307.9 3.8 9.3 741.6
Share of results of
associates 4 19.5 25.3 (22.9) (17.9) 41.1
------------------ ------ ---------- --------- ------- -------- ----------
Profit before interest
and taxation 339.0 333.2 1.7 7.3 782.7
Finance income 5 57.7 51.0 13.1 17.5 111.0
Finance costs 5 (102.6) (97.1) (5.7) (8.0) (211.7)
------------------ ------ ---------- --------- ------- -------- ----------
Profit before taxation 294.1 287.1 2.4 8.9 682.0
Taxation 7 (90.9) (91.7) 0.9 (1.8) (199.4)
------------------ ------ ---------- --------- ------- -------- ----------
Profit for the period 203.2 195.4 4.0 12.4 482.6
------------------ ------ ---------- --------- ------- -------- ----------
Attributable to:
Equity holders of the
parent 181.9 176.7 2.9 11.7 435.8
Minority interests 21.3 18.7 (13.9) (18.8) 46.8
------------------ ------ ---------- --------- ------- -------- ----------
203.2 195.4 4.0 12.4 482.6
------------------ ------ ---------- --------- ------- -------- ----------
------------------ ------ ---------- --------- ------- -------- ----------
Headline PBIT 6,17 383.1 361.0 6.1 12.1 859.0
Headline PBIT margin 17 13.1% 12.6% 14.5%
Headline PBT 17 338.0 316.1 6.9 13.7 766.3
------------------ ------ ---------- --------- ------- -------- ----------
Earnings per share**
Basic earnings
per ordinary share 9 15.3p 14.7p 4.1 13.2 36.3p
Diluted earnings per
ordinary share 9 14.7p 14.3p 2.8 11.7 35.2p
------------------ ------ ---------- --------- ------- -------- ----------
* The basis for calculating the constant currency percentage change shown above
is described in the glossary attached to this appendix.
** The calculations of the Group's earnings per share and Headline earnings per
share are set out in note 9.
Unaudited consolidated interim cash flow statement
for the six months ended 30 June 2007
--------------------------------- ------ -------- --------- ---------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Notes 2007 2006 2006
--------------------------------- ------ -------- --------- ---------
£m £m £m
Net cash (outflow)/inflow
from operating activities 10 (7.2) (26.8) 661.4
Investing activities
Acquisitions and disposals 10 (208.0) (124.8) (215.6)
Purchases of property, plant and equipment (66.1) (66.6) (167.8)
Purchases of other intangible assets
(incl. capitalised computer software) (6.1) (6.9) (16.7)
Proceeds on disposal of
property, plant and equipment 6.6 4.8 22.4
--------------------------------- ------ -------- --------- ---------
Net cash outflow from investing activities (273.6) (193.5) (377.7)
Financing activities
Share option proceeds 21.4 49.5 70.9
Share repurchases and buybacks 10 (209.2) (161.5) (257.7)
Net increase/(decrease) in borrowings 10 111.8 273.0 382.1
Financing and share issue costs (1.9) (0.9) (3.7)
Equity dividends paid - - (118.9)
Dividends paid to minority shareholders in
subsidiary undertakings (20.4) (15.3) (28.8)
--------------------------------- ------ -------- --------- ---------
Net cash (outflow)/inflow from
financing activities (98.3) 144.8 43.9
Net (decrease)/increase
in cash and cash equivalents (379.1) (75.5) 327.6
Translation differences 2.4 (113.7) (50.3)
Cash and cash equivalents
at beginning of period 956.9 679.6 679.6
--------------------------------- ------ -------- --------- ---------
Cash and cash equivalents
at end of period 10 580.2 490.4 956.9
--------------------------------- ------ -------- --------- ---------
Reconciliation of net cash flow to
movement in net debt:
Net (decrease)/increase
in cash and cash equivalents (379.1) (75.5) 327.6
Cash (inflow)/outflow
from (increase)/decrease
in debt financing (109.9) (272.9) (380.1)
Other movements 48.7 9.9 9.3
Translation difference (9.6) (76.8) 32.6
--------------------------------- ------ -------- --------- ---------
Movement of net debt in the period (449.9) (415.3) (10.6)
Net debt at beginning of period (814.6) (804.0) (804.0)
--------------------------------- ------ -------- --------- ---------
Net debt at end of period 11 (1,264.5) (1,219.3) (814.6)
--------------------------------- ------ -------- --------- ---------
Unaudited consolidated interim statement of recognised income and expense
for the six months ended 30 June 2007
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Profit for the period 203.2 195.4 482.6
------------------------------ ----------- ----------- -----------
Exchange adjustments on foreign currency
net investments (33.1) (210.9) (367.0)
Revaluation of other investments (2.6) 2.7 9.5
Actuarial gain on defined benefit pension
schemes - - 26.0
Deferred tax on defined benefit pension
schemes - - 5.3
------------------------------ ----------- ----------- -----------
Net expense recognised directly in equity (35.7) (208.2) (326.2)
Total recognised income and expense
relating to the period 167.5 (12.8) 156.4
------------------------------ ----------- ----------- -----------
Attributable to:
Equity holders of the parent 146.2 (31.5) 109.6
Minority interests 21.3 18.7 46.8
------------------------------ ----------- ----------- -----------
167.5 (12.8) 156.4
------------------------------ ----------- ----------- -----------
Unaudited consolidated interim balance sheet
as at 30 June 2007
-------------------------- ------ ----------- ----------- -----------
30 June 30 June 31 December
Notes 2007 2006 2006
-------------------------- ------ ----------- ----------- -----------
£m £m £m
Non-current assets
Intangible assets:
Goodwill 12 5,530.8 5,492.7 5,434.5
Other 13 1,087.5 1,178.7 1,115.4
Property, plant and equipment 417.5 410.0 415.3
Interests in associates 451.4 443.0 411.4
Other investments 162.2 119.7 136.5
Deferred tax assets 105.4 111.4 108.9
Trade and other receivables 94.3 123.9 110.3
-------------------------- ------ ----------- ----------- -----------
7,849.1 7,879.4 7,732.3
Current assets
Inventory and work in progress 324.4 365.3 341.5
Corporate income tax recoverable 28.6 23.0 26.5
Trade and other receivables 5,205.7 4,630.8 4,931.9
Cash and short-term deposits 755.5 854.8 1,663.7
-------------------------- ------ ----------- ----------- -----------
6,314.2 5,873.9 6,963.6
Current liabilities
Trade and other payables 14 (6,785.0) (6,281.7) (6,783.8)
Corporate income tax payable (50.3) (50.1) (39.6)
Bank overdrafts and loans* (410.6) (924.8) (1,260.6)
-------------------------- ------ ----------- ----------- -----------
(7,245.9) (7,256.6) (8,084.0)
-------------------------- ------ ----------- ----------- -----------
Net current liabilities (931.7) (1,382.7) (1,120.4)
-------------------------- ------ ----------- ----------- -----------
Total assets less current liabilities 6,917.4 6,496.7 6,611.9
-------------------------- ------ ----------- ----------- -----------
Non-current liabilities
Bonds and bank loans (1,609.4) (1,149.3) (1,217.7)
Trade and other payables 15 (407.4) (311.5) (331.9)
Corporate income tax payable (364.4) (378.7) (383.7)
Deferred tax liabilities (461.8) (501.4) (467.8)
Provision for post-employment
benefits (187.6) (231.4) (187.6)
Provisions for liabilities and
charges (104.5) (114.4) (104.8)
-------------------------- ------ ----------- ----------- -----------
(3,135.1) (2,686.7) (2,693.5)
-------------------------- ------ ----------- ----------- -----------
Net assets 3,782.3 3,810.0 3,918.4
-------------------------- ------ ----------- ----------- -----------
Equity
Called-up share capital 121.8 124.9 124.1
Share premium account 97.3 52.6 74.9
Shares to be issued 3.4 15.7 7.5
Merger reserve (1,368.4) (1,374.7) (1,370.0)
Other reserves (324.7) (39.4) (170.1)
Own shares** (256.9) (289.9) (288.5)
Retained earnings 5,414.2 5,240.4 5,449.0
-------------------------- ------ ----------- ----------- -----------
Equity share owners' funds 16 3,686.7 3,729.6 3,826.9
Minority interests 95.6 80.4 91.5
-------------------------- ------ ----------- ----------- -----------
Total Equity 3,782.3 3,810.0 3,918.4
-------------------------- ------ ----------- ----------- -----------
* Included within Bank overdrafts and loans is the Grey $150m convertible
debenture. This was classified as a non-current liability in June 2006, but the
directors now consider this liability to be current as the holders of the bond
can convert at any time. The June 2006 comparative figures have been
reclassified accordingly.
** Investments in own shares held by the ESOP Trusts.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
1. Basis of accounting
The unaudited consolidated interim financial statements are prepared under the
historical cost convention, except for the revaluation of certain financial
instruments as disclosed in our accounting policies.
2. Accounting policies
The unaudited consolidated interim financial statements comply with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS) and with the accounting policies of the Group which were set
out on pages 143 to 148 of the 2006 Annual Report and Accounts. No changes have
been made to the Group's accounting policies in the period to 30 June 2007.
Statutory Information and Independent Review
The unaudited consolidated interim financial statements for the six months to 30
June 2007 and 30 June 2006 do not constitute statutory accounts. The financial
information for the year ended 31 December 2006 does not constitute statutory
accounts for the purposes of s240 of the Companies Act 1985. The statutory
accounts for the year ended 31 December 2006 have been delivered to the
Registrar of Companies and received an unqualified auditors' report and did not
contain a statement under s237(2) or (3) of the Companies Act 1985. The interim
financial statements are unaudited but have been reviewed by the auditors and
their report is set out on page 29.
The announcement of the interim results was approved by the board of directors
on 16 August 2007.
3. Currency conversion
The reporting currency of the Group is the pound sterling and the unaudited
consolidated interim financial statements have been prepared on this basis.
The 2007 unaudited consolidated interim income statement is prepared using,
among other currencies, an average exchange rate of US$1.9703 to the pound
(period ended 30 June 2006: US$1.7908; year ended 31 December 2006: US$1.8432).
The unaudited consolidated interim balance sheet as at 30 June 2007 has been
prepared using the exchange rate on that day of US$2.0071 to the pound (30 June
2006: US$1.8469; 31 December 2006: US$1.9569).
The basis for calculating the constant currency percentage changes, shown on the
face of the unaudited consolidated interim income statement, is described in the
glossary attached to this appendix.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
4. Operating costs and share of results of associates
Operating costs include:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Amortisation and impairment of
acquired intangible assets 17.1 23.0 43.3
Goodwill impairment 29.0 10.0 35.5
Goodwill write-down relating to
utilisation of pre-acquisition
tax losses 1.0 3.0 8.8
Gains on disposal of investments (3.0) (4.2) (7.3)
Share-based incentive plans
(including share options) 33.3 37.9 70.9
Other operating costs 2,372.8 2,337.6 4,718.2
-------------------------------- ---------- ---------- ----------
2,450.2 2,407.3 4,869.4
-------------------------------- ---------- ---------- ----------
The goodwill impairment charge of £29.0 million relates 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 an impairment to the carrying value of
goodwill. The Directors will reassess the need for any further impairment
write-downs at year end.
Share of results of associates include:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Share of profit before interest and taxation 31.5 34.4 61.4
Share of exceptional gains - 4.0 4.0
Share of interest and minority interest 0.7 0.6 0.9
Share of taxation (12.7) (13.7) (25.2)
-------------------------------- ---------- ---------- ----------
19.5 25.3 41.1
-------------------------------- ---------- ---------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
5. Finance income and finance costs
Finance income includes:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Expected return on pension scheme assets 14.1 13.0 25.2
Investment income 4.0 0.5 5.7
Interest income 39.6 37.5 80.1
-------------------------------- ---------- ---------- ----------
57.7 51.0 111.0
-------------------------------- ---------- ---------- ----------
Finance costs include:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Interest on pension scheme liabilities 17.0 16.5 32.4
Interest payable and similar charges 85.8 79.4 171.3
-------------------------------- ---------- ---------- ----------
Finance charges (excluding
revaluation of financial instruments) 102.8 95.9 203.7
Revaluation of financial instruments (0.2) 1.2 8.0
-------------------------------- ---------- ---------- ----------
102.6 97.1 211.7
-------------------------------- ---------- ---------- ----------
The following are included in the revaluation of financial instruments shown
above:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Movements in fair value of
treasury instruments 0.4 2.9 3.3
Revaluations of put options over
minority interests (0.6) (1.7) 4.7
-------------------------------- ---------- ---------- ----------
(0.2) 1.2 8.0
-------------------------------- ---------- ---------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
6. Segmental analysis
Reported contributions by operating sector were as follows:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Revenue
Advertising and Media Investment
Management 1,364.4 1,354.4 2,806.9
Information, Insight & Consultancy 431.8 438.9 892.9
Public Relations & Public Affairs 313.0 290.3 595.7
Branding & Identity, Healthcare
and Specialist Communications 811.8 780.8 1,612.3
-------------------------------- ---------- ---------- ----------
2,921.0 2,864.4 5,907.8
-------------------------------- ---------- ---------- ----------
Headline PBIT*
Advertising and Media Investment
Management 201.1 190.3 443.7
Information, Insight & Consultancy 42.0 41.5 98.7
Public Relations & Public Affairs 46.0 40.3 89.5
Branding & Identity, Healthcare
and Specialist Communications 94.0 88.9 227.1
-------------------------------- ---------- ---------- ----------
383.1 361.0 859.0
-------------------------------- ---------- ---------- ----------
Headline PBIT margin % % %
Advertising and Media Investment
Management 14.7 14.1 15.8
Information, Insight & Consultancy 9.7 9.5 11.1
Public Relations & Public Affairs 14.7 13.9 15.0
Branding & Identity, Healthcare
and Specialist Communications 11.6 11.4 14.1
-------------------------------- ---------- ---------- ----------
13.1 12.6 14.5
-------------------------------- ---------- ---------- ----------
* Headline PBIT is defined in note 17.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
6. Segmental analysis (continued)
Reported contributions by geographical area were as follows:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Revenue
United Kingdom 430.4 415.1 856.3
North America 1,111.6 1,135.5 2,291.1
Continental Europe 771.6 741.4 1,532.9
Asia Pacific, Latin America,
Africa & Middle East 607.4 572.4 1,227.5
-------------------------------- ---------- ---------- ----------
2,921.0 2,864.4 5,907.8
-------------------------------- ---------- ---------- ----------
Headline PBIT*
United Kingdom 47.5 36.7 97.9
North America 175.8 176.1 389.0
Continental Europe 90.2 85.8 194.3
Asia Pacific, Latin America,
Africa & Middle East 69.6 62.4 177.8
-------------------------------- ---------- ---------- ----------
383.1 361.0 859.0
-------------------------------- ---------- ---------- ----------
Headline PBIT margin % % %
United Kingdom 11.0 8.8 11.4
North America 15.8 15.5 17.0
Continental Europe 11.7 11.6 12.7
Asia Pacific, Latin America,
Africa & Middle East 11.5 10.9 14.5
-------------------------------- ---------- ---------- ----------
13.1 12.6 14.5
-------------------------------- ---------- ---------- ----------
* Headline PBIT is defined in note 17.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
7. Taxation
The Group tax rate on Headline PBT* is 26.9% (30 June 2006: 29.0% and 31
December 2006: 26.0%).
The Group tax rate on Reported PBT is 30.9% (30 June 2006: 31.9% and 31 December
2006: 29.2%).
The tax charge comprises:
------------------------------ ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
------------------------------ ---------- ---------- ----------
£m £m £m
Current tax
UK Corporation tax at 30%
Current year 11.0 16.6 36.6
Prior years 2.4 (4.7) (44.9)
------------------------------ ---------- ---------- ----------
13.4 11.9 (8.3)
Foreign tax
Current year 84.7 80.9 216.9
Prior years (3.2) - (7.6)
------------------------------ ---------- ---------- ----------
81.5 80.9 209.3
------------------------------ ---------- ---------- ----------
Total Current tax 94.9 92.8 201.0
------------------------------ ---------- ---------- ----------
Deferred tax
Current year (4.0) (1.1) (1.6)
------------------------------ ---------- ---------- ----------
Tax expense 90.9 91.7 199.4
------------------------------ ---------- ---------- ----------
* Headline PBT is defined in note 17.
8. Ordinary dividends
The Board has recommended an interim dividend of 4.32p (2006: 3.60p) per
ordinary share. This is expected to be paid on 12 November 2007 to share owners
on the register at 12 October 2007.
The Board recommended a final dividend of 7.61p per ordinary share in respect of
2006. This was approved by the company's shareholders at the Annual General
Meeting on 26 June 2007 and paid on 9 July 2007.
9. Earnings per share
Basic EPS
The calculation of basic Reported and Headline EPS is as follows:
------------------------ -------- --------- ------ ------- ----------
Six months Six months Year
ended ended Constant ended
30 June 30 June Currency 31 December
2007 2006 +/(-)% +/(-)% 2006
------------------------ -------- --------- ------ ------- ----------
Reported earnings* (£m) 181.9 176.7 435.8
Headline earnings(£m)(note 17) 225.8 205.7 520.1
------------------------ -------- --------- ------ ------- ----------
Average shares used in
Basic EPS calculation (m) 1,189.5 1,205.2 1,201.0
------------------------ -------- --------- ------ ------- ----------
Reported EPS 15.3p 14.7p 4.1 13.2 36.3p
Headline EPS 19.0p 17.1p 11.1 20.4 43.3p
----------------------- --------- --------- ------ ------- -----------
* Reported earnings is equivalent to profit for the period attributable to
equity holders of the parent.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
9. Earnings per share (continued)
Diluted EPS
The calculation of diluted Reported and Headline EPS is set out below:
----------------------- --------- --------- ------- ------- ----------
Six months Six months Year
ended ended Constant ended
30 June 30 June Currency 31 December
2007 2006 +/(-)% +/(-)% 2006
----------------------- --------- --------- ------- ------- ----------
Diluted Reported
earnings (£m) 182.4 177.2 436.9
Diluted Headline
earnings (£m) 226.3 206.2 521.2
----------------------- --------- --------- ------- ------- ----------
Shares used in diluted EPS
calculation (m) 1,242.8 1,243.5 1,242.2
----------------------- --------- --------- ------- ------- ----------
Diluted Reported EPS 14.7p 14.3p 2.8 11.7 35.2p
Diluted Headline EPS 18.2p 16.6p 9.6 18.8 42.0p
----------------------- --------- --------- ------- ------- ----------
Diluted EPS has been calculated based on the Reported and Headline Earnings
amounts above. For the six months ended 30 June 2007 and the six months ended 30
June 2006 the $150 million Grey convertible was dilutive and earnings were
consequently increased by £0.5 million. For the six months ended 30 June 2006,
the £450 million convertible bonds were accretive to earnings and therefore
excluded from the calculation of dilutive earnings; these bonds were redeemed on
their due date of 11 April 2007.
A reconciliation between the shares used in calculating Basic and Diluted EPS is
as follows:
------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
------------------------------- ---------- ---------- ----------
m m m
Average shares used in Basic EPS
calculation 1,189.5 1,205.2 1,201.0
Dilutive share options
outstanding 20.4 18.0 14.9
Other potentially issuable shares 24.0 11.4 17.4
$150 million Grey convertible
bonds 8.9 8.9 8.9
------------------------------- ---------- ---------- ----------
Shares used in Diluted EPS
calculation 1,242.8 1,243.5 1,242.2
------------------------------- ---------- ---------- ----------
At 30 June 2007 there were 1,217,999,223 ordinary shares in issue.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
10. Analysis of cash flows
The following tables analyse the items included within the main cash flow
headings on page 12:
Net cash (outflow)/inflow from operating activities:
----------------------------------- --------- --------- ---------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
----------------------------------- --------- --------- ---------
£m £m £m
Profit for the period 203.2 195.4 482.6
Taxation 90.9 91.7 199.4
Finance costs 102.6 97.1 211.7
Finance income (57.7) (51.0) (111.0)
Share of results of associates (19.5) (25.3) (41.1)
----------------------------------- --------- --------- ---------
Operating profit 319.5 307.9 741.6
Adjustments for:
Share-based incentive plans (including
share options) 33.3 37.9 70.9
Depreciation of property, plant and
equipment 60.7 60.8 129.1
Goodwill impairment 29.0 10.0 35.5
Goodwill write-down relating to
utilisation of pre-acquisition tax losses 1.0 3.0 8.8
Amortisation and impairment of acquired
intangible assets 17.1 23.0 43.3
Amortisation of other intangible assets 8.7 6.1 13.5
Gains on disposal of investments (3.0) (4.2) (7.3)
(Gains)/losses on sale of property,
plant and equipment (1.9) (0.2) (3.7)
----------------------------------- --------- --------- ---------
Operating cash flow before movements in
working capital and provisions 464.4 444.3 1,031.7
Movements in working capital and
provisions (348.7) (375.4) (171.1)
----------------------------------- --------- --------- ---------
Cash generated by operations 115.7 68.9 860.6
Corporation and overseas tax paid (76.2) (69.3) (162.0)
Interest and similar charges paid (84.3) (76.9) (135.1)
Interest received 17.4 39.5 75.2
Investment income 4.0 - 2.4
Dividends from associates 16.2 11.0 20.3
----------------------------------- --------- --------- ---------
(7.2) (26.8) 661.4
----------------------------------- --------- --------- ---------
Acquisitions and disposals:
----------------------------------- --------- --------- ---------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
----------------------------------- --------- --------- ---------
£m £m £m
Initial cash consideration (80.3) (50.0) (120.5)
Cash and cash equivalents
acquired (net) 9.2 15.6 21.4
Earnout payments (64.8) (81.0) (91.6)
Loan note redemptions (1.6) (11.5) (11.7)
Purchase of other investments
(including associates) (73.5) (11.6) (28.7)
Proceeds on disposal of
investments 3.0 13.7 15.5
----------------------------------- --------- --------- ---------
(208.0) (124.8) (215.6)
----------------------------------- --------- --------- ---------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
10. Analysis of cash flows (continued)
Share repurchases and buybacks:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Share cancellations (excluding
brokerage fees) (209.2) (123.1) (218.8)
Purchase of own shares by ESOP Trusts - (38.4) (38.9)
-------------------------------- ---------- ---------- ----------
(209.2) (161.5) (257.7)
-------------------------------- ---------- ---------- ----------
Net increase/(decrease) in borrowings:
-------------------------------- ---------- --------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Increase/(decrease) in drawings
on bank loans 161.8 273.0 (21.8)
Repayment of £450 million
convertible bonds (450.0) - -
Proceeds from issue of £400
million bonds 400.0 - -
Proceeds from issue of €600
million Eurobonds - - 403.9
-------------------------------- ---------- --------- ----------
111.8 273.0 382.1
-------------------------------- ---------- --------- ----------
Cash and cash equivalents:
-------------------------------- ---------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Cash at bank and in hand 638.1 741.2 1,476.8
Short-term bank deposits 117.4 113.6 186.9
Overdrafts* (175.3) (364.4) (706.8)
-------------------------------- ---------- ---------- ----------
580.2 490.4 956.9
-------------------------------- ---------- ---------- ----------
* Bank overdrafts are included in cash and cash equivalents because they form an
integral part of the Group's cash management.
11. Net debt
-------------------------------- ---------- ---------- ----------
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- ---------- ----------
£m £m £m
Cash and short-term deposits 755.5 854.8 1,663.7
Bank loans and overdrafts due within
one year (410.6) (924.8) (1,260.6)
Corporate bond and loans due after one
year (1,609.4) (1,149.3) (1,217.7)
-------------------------------- ---------- ---------- ----------
Net debt (1,264.5) (1,219.3) (814.6)
-------------------------------- ---------- ---------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
12. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings increased by £96.3 million (30
June 2006: decrease of £182.5 million) in the period. This movement includes
both additional goodwill arising on acquisitions completed in the period and
adjustments to goodwill relating to acquisitions completed in prior years, net
of impairment charges and the effect of currency translation. Goodwill in
relation to associate undertakings increased by £29.3 million (30 June 2006:
decrease of £54.0 million) in the period.
Future anticipated payments to vendors in respect of both deferred and earnout
obligations totalled £284.5 million (period ended 30 June 2006: £167.7 million;
year ended 31 December 2006: £235.5 million). Earnouts are 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.
The contribution to revenue and operating profit of acquisitions completed in
the six months ended 30 June 2007 was not material.
The Group completed the acquisition of 24/7 Real Media, Inc. on 2 July 2007 for
total consideration of approximately $650 million. The company will be
consolidated in the results of the Group from that date.
13. Other intangible assets
The following are included in other intangibles:
-------------------------------- ---------- --------- ----------
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Brands with an indefinite useful life 800.4 853.0 811.4
Acquired intangibles 256.4 296.8 271.9
Other (including capitalised computer
software) 30.7 28.9 32.1
-------------------------------- ---------- --------- ----------
1,087.5 1,178.7 1,115.4
-------------------------------- ---------- --------- ----------
14. Trade and other payables: amounts falling due within one year
The following are included in trade and other payables falling due within one
year:
-------------------------------- ---------- --------- ----------
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Trade payables 4,600.8 4,250.2 4,743.6
Deferred income 534.7 584.0 510.8
Payments due to vendors 55.8 46.0 87.9
Loan notes due to vendors 0.7 2.1 1.8
Liabilities in respect of put option
agreements with vendors 42.9 50.2 51.1
Share repurchases - close period
commitments 61.0 - -
Dividends payable 89.6 76.1 -
Other creditors and accruals 1,399.5 1,273.1 1,388.6
-------------------------------- ---------- --------- ----------
6,785.0 6,281.7 6,783.8
-------------------------------- ---------- --------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
15. 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:
-------------------------------- ---------- --------- ----------
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Payments due to vendors 228.7 121.7 147.6
Liabilities in respect of put option
agreements with vendors 25.9 40.4 28.8
Other creditors and accruals 152.8 149.4 155.5
-------------------------------- ---------- --------- ----------
407.4 311.5 331.9
-------------------------------- ---------- --------- ----------
The following table sets out payments due to vendors, comprising deferred
consideration and the directors' best estimates of future earnout related
obligations:
-------------------------------- ---------- --------- ----------
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Within one year 55.8 46.0 87.9
Between 1 and 2 years 42.8 43.8 36.1
Between 2 and 3 years 63.6 26.4 34.6
Between 3 and 4 years 64.1 27.9 49.1
Between 4 and 5 years 39.6 18.8 27.8
Over 5 years 18.6 4.8 -
-------------------------------- ---------- --------- ----------
284.5 167.7 235.5
-------------------------------- ---------- --------- ----------
The Group does not consider there to be any material contingent liabilities as
at 30 June 2007. Note 12 includes details of a material acquisition which has
been completed since 30 June 2007, 24/7 Real Media, Inc.
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
16. Reconciliation of movements in consolidated equity share owners' funds
-------------------------------- --------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- --------- ---------- ----------
£m £m £m
Profit for the period
attributable to equity share owners 181.9 176.7 435.8
Ordinary dividends (89.6) (76.1) (118.9)
-------------------------------- --------- ---------- ----------
92.3 100.6 316.9
Ordinary shares issued in respect
of acquisitions 2.3 - -
Other ordinary shares issued 20.3 48.4 73.0
Share cancellations (209.2) (123.1) (218.8)
Share issue/cancellation costs - (0.7) (1.7)
Net additions of own shares by
ESOP Trusts - (38.4) (38.9)
Share-based incentive plans
(including share options) 33.3 37.9 70.9
Tax benefit of share-based
payments 7.0 10.1 32.3
Actuarial gain on defined benefit
schemes - - 26.0
Deferred tax on defined benefit
pension schemes - - 5.3
Exchange adjustments on foreign
currency net investments (33.1) (210.9) (367.0)
Financial instruments - movements
during the period 10.5 (2.3) 14.9
Share repurchases - close period
commitments* (61.0) - -
Revaluation of other investments (2.6) 2.7 9.5
Other movements - 0.8 -
-------------------------------- --------- ---------- ----------
Net (deductions)/additions to
equity share owners' funds (140.2) (174.9) (77.6)
Opening equity share owners'
funds 3,826.9 3,904.5 3,904.5
-------------------------------- --------- ---------- ----------
Closing equity share owners'
funds 3,686.7 3,729.6 3,826.9
-------------------------------- --------- ---------- ----------
* During the period, the Company entered into an arrangement with its broker to
conduct share buybacks on the Company's behalf in the close period commencing on
2 July 2007 and ending on 16 August 2007, in accordance with UK listing rules.
Under IAS 32 and IAS 39, the commitment resulting from this agreement
constitutes a financial liability at 30 June 2007 which must be recognised at
fair value at that date. This liability is included in Trade and other payables:
amounts falling due within one year and has been recognised as a movement in
equity.
Issued share capital - movement in the period
-------------------------------- --------- ---------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- --------- ---------- ----------
Number of equity ordinary shares '000 '000 '000
At the beginning of the period 1,240,605.2 1,252,899.4 1,252,899.4
Exercise of share options 4,994.4 14,764.2 20,984.1
Acquisitions 305.3 - -
Share cancellations (27,905.7) (18,417.0) (33,157.1)
Other - - (121.2)
-------------------------------- --------- ---------- ----------
At the end of the period 1,217,999.2 1,249,246.6 1,240,605.2
-------------------------------- --------- ---------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
17. Non-GAAP measures of performance
Reconciliation of profit before interest and taxation to
Headline PBIT for the six months ended 30 June 2007
-------------------------------- ---------- --------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Profit before interest and taxation 339.0 333.2 782.7
Amortisation and impairment of
acquired intangible assets 17.1 23.0 43.3
Goodwill impairment 29.0 10.0 35.5
Goodwill write-down relating to
utilisation of pre-acquisition tax losses 1.0 3.0 8.8
Gains on disposal of investments (3.0) (4.2) (7.3)
Share of exceptional gains of associates - (4.0) (4.0)
-------------------------------- ---------- --------- ----------
Headline PBIT 383.1 361.0 859.0
-------------------------------- ---------- --------- ----------
Finance income 57.7 51.0 111.0
Finance charges (excluding
revaluation of financial
instruments) (102.8) (95.9) (203.7)
-------------------------------- ---------- --------- ----------
(45.1) (44.9) (92.7)
-------------------------------- ---------- --------- ----------
Interest cover on Headline PBIT 8.5 times 8.0 times 9.3 times
-------------------------------- ---------- --------- ----------
Calculation of Headline EBITDA
-------------------------------- ---------- --------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
-------------------------------- ---------- --------- ----------
£m £m £m
Headline PBIT (as above) 383.1 361.0 859.0
Depreciation of property, plant
and equipment 60.7 60.8 129.1
Amortisation of other intangible
assets 8.7 7.1 13.5
-------------------------------- ---------- --------- ----------
Headline EBITDA 452.5 428.9 1,001.6
-------------------------------- ---------- --------- ----------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
17. Non-GAAP measures of performance (continued)
Reconciliation of profit before taxation to Headline PBT
and Headline earnings for the six months ended 30 June 2007
------------------------------- --------- ---------- -----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
------------------------------- --------- ---------- -----------
£m £m £m
Profit before taxation 294.1 287.1 682.0
Amortisation and impairment of
acquired intangible assets 17.1 23.0 43.3
Goodwill impairment 29.0 10.0 35.5
Goodwill write-down relating to
utilisation of pre-acquisition tax losses 1.0 3.0 8.8
Gains on disposal of investments (3.0) (4.2) (7.3)
Share of exceptional gains of associates - (4.0) (4.0)
Revaluation of financial instruments (0.2) 1.2 8.0
------------------------------- --------- ---------- -----------
Headline PBT 338.0 316.1 766.3
Taxation (90.9) (91.7) (199.4)
Minority interests (21.3) (18.7) (46.8)
------------------------------- --------- ---------- -----------
Headline earnings 225.8 205.7 520.1
------------------------------- --------- ---------- -----------
Ordinary dividends 89.6 76.1 118.9
------------------------------- --------- ---------- -----------
Dividend cover on Headline earnings 2.5 times 2.7 times 4.4 times
------------------------------- --------- ---------- -----------
Headline PBIT margins before and after share of results of associates
--------------------------- -------- --------- --------- ---------
Six months Six months
ended ended
30 June 30 June
Margin (%) 2007 Margin (%) 2006
--------------------------- -------- --------- --------- ---------
£m £m
Revenue 2,921.0 2,864.4
Headline PBIT 13.1% 383.1 12.6% 361.0
--------------------------- -------- --------- --------- ---------
Share of results of associates
(excluding exceptional gains) 19.5 21.3
--------------------------- -------- --------- --------- ---------
Headline PBIT excluding share
of results of associates 12.4% 363.6 11.9% 339.7
--------------------------- -------- --------- --------- ---------
Notes to the unaudited consolidated interim financial statements (Notes 1 - 17)
(continued)
17. Non-GAAP measures of performance (continued)
Reconciliation of free cash flow for the six months ended 30 June 2007
---------------------------------- --------- --------- ----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
---------------------------------- --------- --------- ----------
£m £m £m
Cash generated by operations 115.7 68.9 860.6
Plus:
Interest received 17.4 39.5 75.2
Investment income 4.0 - 2.4
Dividends from associates 16.2 11.0 20.3
Share option proceeds 21.4 49.5 70.9
Proceeds on disposal of property,
plant and equipment 6.6 4.8 22.4
Gains on sale of property, plant
and equipment 1.9 0.2 3.7
Movements in working capital and
provisions 348.7 375.4 171.1
Less:
Interest and similar charges paid (84.3) (76.9) (135.1)
Purchases of property, plant and
equipment (66.1) (66.6) (167.8)
Purchases of other intangible
assets (including capitalised
computer software) (6.1) (6.9) (16.7)
Corporation and overseas tax paid (76.2) (69.3) (162.0)
Dividends paid to minority
shareholders in subsidiary
undertakings (20.4) (15.3) (28.8)
---------------------------------- --------- --------- ----------
Free Cash Flow 278.8 314.3 716.2
---------------------------------- --------- --------- ----------
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 2007 which comprise the consolidated income
statement, the consolidated statement of recognised income and expense, the
consolidated cash flow statement, the consolidated balance sheet and related
notes 1 to 17. 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.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
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 are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons 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 International Standards on Auditing (UK and
Ireland) 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 2007.
Deloitte & Touche LLP
London
Chartered Accountants
16 August 2007
Appendix 2
WPP GROUP PLC
Interim results for the six months ended 30 June 2007
in reportable US Dollars*
Unaudited illustrative consolidated interim income statement
for the six months ended 30 June 2007
------------------ ---------- ---------- -------- ------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
------------------ ---------- ---------- -------- ------------
$m $m +/(-)% $m
Billings 29,747.8 25,823.5 15.2 55,435.0
================== ========== ========== ======== ============
Revenue 5,764.3 5,132.6 12.3 10,910.9
Direct costs (299.1) (266.9) (12.1) (547.2)
------------------ ---------- ---------- -------- ------------
Gross profit 5,465.2 4,865.7 12.3 10,363.7
Operating costs (4,833.2) (4,310.8) (12.1) (8,982.8)
------------------ ---------- ---------- -------- ------------
Operating profit 632.0 554.9 13.9 1,380.9
Share of results of associates 38.3 45.6 (16.0) 76.3
------------------ ---------- ---------- -------- ------------
Profit before interest and
taxation 670.3 600.5 11.6 1,457.2
Finance income 112.4 90.0 24.9 200.9
Finance costs (201.0) (172.4) (16.6) (386.9)
------------------ ---------- ---------- -------- ------------
Profit before taxation 581.7 518.1 12.3 1,271.2
Taxation (179.8) (165.7) (8.5) (371.6)
------------------ ---------- ---------- -------- ------------
Profit for the period 401.9 352.4 14.0 899.6
------------------ ---------- ---------- -------- ------------
Attributable to:
Equity holders of the parent 359.9 319.0 12.8 812.4
Minority interests 42.0 33.4 (25.7) 87.2
------------------ ---------- ---------- -------- ------------
401.9 352.4 14.0 899.6
------------------ ---------- ---------- -------- ------------
------------------ ---------- ---------- -------- ------------
Headline PBIT 757.6 650.4 16.5 1,600.9
Headline PBIT margin 13.1% 12.7% 14.7%
Headline PBT 668.6 570.3 17.2 1,430.5
------------------ ---------- ---------- -------- ------------
Reported earnings per share**
Basic earnings per ordinary share 30.3c 26.5c 14.3 67.6c
Diluted earnings per ordinary share 29.0c 25.7c 12.8 65.6c
------------------ ---------- ---------- -------- ------------
Headline earnings per share**
Basic earnings per ordinary share 37.6c 30.8c 22.1 80.9c
Diluted earnings per ordinary share 36.0c 29.9c 20.4 78.4c
------------------ ---------- ---------- -------- ------------
* The unaudited consolidated income statement above is presented in reportable
US Dollars for information purposes only and 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
periods presented. Among other currencies, this includes an average exchange
rate of US$1.9703 to the pound for the period ended 30 June 2007 (period ended
30 June 2006: US$1.7908; year ended 31 December 2006: US$1.8432).
** The basis of the calculations of the Group's earnings per share and Headline
earnings per share are set out in note 9 of Appendix 1.
GLOSSARY AND BASIS OF PREPARATION
Average net debt
Average net debt is calculated as the average daily net bank borrowings of the
Group, derived from the Group's automated banking system. Net debt at a period
end is calculated as the sum of the net bank borrowings of the Group, derived
from the cash ledgers and accounts in the balance sheet.
Billings and estimated net new billings
Billings comprise the gross amounts billed to clients in respect of
commission-based / fee-based income together with the total of other fees
earned. Net new billings represent the estimated annualised impact on billings
of new business gained from both existing and new clients, net of existing
client business lost. The estimated impact is based upon initial assessments of
the clients' media budgets, which may not necessarily result in actual billings
of the same amount.
Constant currency
The Group uses US dollar-based, constant currency models to measure performance.
These are calculated by applying budgeted 2007 exchange rates to local currency
reported results for the current and prior year. This gives a US dollar -
denominated income statement and balance sheet which exclude any variances
attributable to foreign exchange rate movements.
Free cash flow
Free cash flow is calculated as Headline operating profit before non cash
charges for share-based incentive plans, depreciation of property, plant and
equipment and amortisation of other intangible assets, including dividends
received from associates, interest received, investment income received,
proceeds from the issue of shares, and proceeds from the disposal of property,
plant and equipment, less corporation and overseas tax paid, interest and
similar charges paid, dividends paid to minority shareholders in subsidiary
undertakings, purchases of property, plant and equipment and purchases of other
intangible assets.
Headline earnings
Headline PBT less taxation and minority interests.
Headline operating profit / Headline PBIT
Profit before finance income/costs, taxation, investment gains, goodwill
impairment and other goodwill write-downs, amortisation and impairment of
acquired intangible assets, and share of exceptional gains of associates.
Headline PBT
Profit before taxation, investment gains, goodwill impairment and other goodwill
write-downs, amortisation and impairment of acquired intangible assets, share of
exceptional gains of associates and gains/losses arising from the revaluation of
financial instruments.
Operating margin
Headline operating profit as a percentage of revenue.
Pro forma ('like-for-like')
Pro forma comparisons are calculated as follows: current year, constant currency
actual results (which include acquisitions from the relevant date of completion)
are compared with prior year, constant currency actual results, adjusted to
include the results of acquisitions for the commensurate period in the prior
year. The Group uses the terms 'pro forma' and 'like-for-like' interchangeably.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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