Interim Results - Part 3

WPP GROUP PLC 16 August 1999 PART 3 WPP GROUP PLC Unaudited reconciliation of movements in consolidated share owners' funds for the period ended 30 June 1999 Six months Six months Year ended ended ended 30 June 30 June 31 December 1999 1998 1998 £m £m £m Profit for the period 75.3 61.6 140.3 Ordinary dividends payable (7.8) (6.2) (19.6) ------------------------------------------ 67.5 55.4 120.7 Exchange adjustments on foreign currency net investments (33.4) (4.1) 4.0 Share buybacks - (17.1) (21.3) Shares issued for acquisitions - - 105.4 Other movements 4.8 3.0 4.1 ----------------------------------------- Net additions to share owners funds 38.9 37.2 212.9 Opening share owners funds 187.7 (25.2) (25.2) ------------------------------------------ Closing share owners funds 226.6 12.0 187.7 ----------------------------------------- Unaudited statement of consolidated recognised gains and losses for the period ended 30 June, 1999 Six months Six months Year ended ended ended 30 June 30 June 31 December 1999 1998 1998 £m £m £m Profit for the period 75.3 61.6 140.3 Exchange adjustments on foreign currency net investments (33.4) (4.1) 4.0 ---------------------------------------- Total recognised gains 41.9 57.5 144.3 ---------------------------------------- WPP GROUP PLC Notes to the unaudited consolidated interim financial statements 1. Basis of accounting The consolidated interim financial statements are prepared under the historical cost convention. 2. Accounting policies The consolidated interim financial statements comply with relevant accounting standards and have been prepared using accounting policies set out on pages 52 and 53 of the Group's 1998 Annual Report and Accounts, apart from the adoption of FRS 12 (Provisions and Contingencies) and FRS 13 (Derivatives and Other Financial Instruments). There has been no material impact on the financial statements as a result of the adoption of these new standards. The policies set out in the 1998 Annual Report and Accounts are in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). 3. Currency conversion The 1999 unaudited interim consolidated profit and loss account is prepared using, among other currencies, an average exchange rate of US$1.6197 to the pound (period ended 30 June, 1998: US$1.65; year ended 31 December, 1998: US$1.6574). The balance sheet as at 30 June, 1999 has been prepared using the exchange rate on that day of US$1.5763 to the pound (30 June, 1998: US$1.6685; 31 December, 1998: US$1.6638). The constant currency percentage changes shown on the face of the profit and loss account have been calculated by applying 1999 exchange rates to the results for 1998 and 1999. The unaudited preliminary consolidated profit and loss account and balance sheet are presented in Euros in Appendix II for illustrative purposes. The unaudited interim consolidated profit and loss account is prepared using an average exchange rate of Euro1.5372 to the pound (period ended 30 June, 1998: Euro1.5070; year ended 31 December 1998: Euro1.4771). The balance sheet as at 30 June, 1999 has been prepared using the exchange rate on the day of Euro1.5285 to the pound (30 June, 1998: Euro1.5197; 31 December, 1998: Euro1.4169). 4. Segmental Analysis Reported contributions by geographical area were as follows: 30 June 30 June 31 December 1999 1998 1998 £m £m £m Revenue United Kingdom 212.0 187.3 393.5 United States 432.4 369.4 764.4 Continental Europe 199.1 174.8 396.0 Canada, Asia Pacific, Latin America, Africa & Middle East 173.8 168.5 364.5 ---------------------------- 1,017.3 900.0 1,918.4 ============================ PBIT1 United Kingdom 25.2 20.9 42.2 United States 68.0 55.8 111.6 Continental Europe 25.0 24.5 55.0 Canada, Asia Pacific, Latin America, Africa & Middle East 10.7 7.3 36.4 ---------------------------- 128.9 108.5 245.2 ============================ Reported contributions by operating sector were as follows: 30 June 30 June31 December 1999 1998 1998 £m £m £m Revenue Advertising , media planning, buying and research 477.2 450.5 951.3 Information and consultancy 191.9 163.2 367.2 Public relations and public affairs 82.8 64.7 134.8 Branding and identity, healthcare and specialist communications 265.4 221.6 465.1 --------------------------- 1,017.3 900.0 1,918.4 ============================ PBIT1 Advertising, media planning, buying and research 69.2 63.2 141.3 Information and consultancy 18.0 15.3 39.3 Public relations and public affairs 11.6 8.1 15.7 Branding and identity, healthcare and specialist communications 30.1 21.9 48.9 ------------------------------ 128.9 108.5 245.2 ============================= 1 PBIT: Profit on ordinary activities before interest and taxation 5. Taxation The Group tax rate on profit on ordinary activities before taxation is 31% (30 June, 1998: 32%; year ended 31 December, 1998: 31.5%). The tax charge relates mainly to overseas operations, except for £5.1 million in respect of UK corporation tax and £4.3 million in respect of associated companies. 6. Interim dividend An interim dividend of 1.0p (1998: 0.84p net) per ordinary share has been declared by the Board. This is expected to be paid on 20 November 1999 to share owners on the register at 22 October 1999. No advance corporation tax is payable in respect of the interim dividend owing to the abolition of ACT with effect from April 1999. 7. Earnings per share Basic and fully diluted earnings per share have been calculated in accordance with FRS14 'Earnings per share', and the prior year comparatives have been restated accordingly. (a) Basic earnings per share have been calculated using earnings of £75.3 million (30 June, 1998: £61.6 million; year ended 31 December, 1998: £140.3 million) and weighted average shares in issue during the six months to 30 June, 1999 of 752,798,633 shares (30 June, 1998: 729,757,040 shares; year ended 31 December, 1998: 735,700,122 shares). (b) Fully diluted earnings per share have been calculated on a weighted average of 768,181,423 shares (30 June, 1998: 737,407,317 shares; year ended 31 December, 1998: 746,939,733 shares). This takes into account the exercise of employee share options where these are expected to dilute earnings. (c) At 30 June, 1999 there were 769,574,125 ordinary shares in issue. 8. Net movement on goodwill Total goodwill of £58.5 million arising during the period includes £46.1 million in respect of the acquisition of subsidiary undertakings. In addition, investments include £12.4 million of goodwill in respect of associate undertakings. Cash paid in respect of these acquisitions was £57.3 million. Future anticipated payments to vendors totalled £97.2 million (30 June, 1998: £52.7 million; 31 December, 1998: £97.9 million), based on the directors best estimates of future obligations, which are dependent on future performance of the interests acquired. These acquisitions do not have a significant impact on the Groups results for the six months to 30 June 1999. 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 1999 1998 1998 £m £m £m Bank loans and overdrafts 105.9 57.2 95.4 Trade creditors 1,160.5 1,033.5 1,102.4 Corporate income tax payable 58.7 38.8 50.0 Deferred income 103.6 86.3 111.1 Payments due to vendors (note 8) 6.1 6.6 14.3 Other creditors and accruals 411.8 348.4 404.1 -------- -------- ------- 1,846.6 1,570.8 1,777.3 ======== ======== ======= Overdraft balances included within bank loans and overdrafts amount to £105.9 million (30 June, 1998: £48.1 million; 31 December, 1998 : £95.4 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 1999 1998 1998 £m £m £m Corporate bond and bank loans 249.2 189.9 194.2 Corporate income taxes payable 99.2 78.5 91.3 Payments due to vendors (note 8) 91.1 46.1 83.6 Other creditors and accruals 29.1 31.2 32.4 ------ ------- ------- 468.6 345.7 401.5 ====== ======= ======= 11. Net (debt) / funds 30 June 30 June 31 December 1999 1998 1998 £m £m £m Cash at bank and in hand 302.7 221.9 423.9 Bank loans and overdrafts due within one year (105.9) (57.2) (95.4) (note 9) Corporate bond and loans due after one year (note 10) (249.2) (189.9) (194.2) ------- -------- ------- Net (debt) / funds (52.4) (25.2) 134.3 ======= ======== ===== 12. Year 2000 compliance As referred to in the Groups 1998 annual report, WPP has now substantially completed a Group-wide programme of work designed to achieve its Year 2000 compliance objectives by 30 June 1999. The cost of this work is still estimated to be in the region of $20 million being expended between 1997 and 2000. Year 2000 compliance of most of the Groups IT systems and products was achieved by the target date. The remediation of the remaining non-compliant IT systems or products is planned to be completed before the end of September 1999. The Group will continue to monitor the Year 2000 compliance of its business critical suppliers and clients. The Groups Year 2000 compliance programme and its associated contingency plans are designed to minimise the disruption to the business of WPP arising from the millennium date change. However, there can be no guarantee that every possible cause of business disruption will be avoided, especially where due to events outside the control of the Group. 13. Statutory information and audit review The results for the six months to 30 June, 1999 and 1998 do not constitute statutory accounts. The statutory accounts for the year ended 31 December, 1998 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 below. INDEPENDENT REVIEW REPORT TO WPP GROUP PLC Introduction We have been instructed by the company to review the financial information set out on pages 11 to 19 and 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 Listing Rules of the London Stock Exchange 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 guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. 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 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 1999. Arthur Andersen Chartered Accountants London 16 August 1999 WPP GROUP PLC Appendix II Preliminary results for the six months ended 30 June, 1999 Unaudited preliminary consolidated profit & loss account for the six months ended 30 June, 1999 Presented in Euros for illustrative purposes only Six months Six months Year ended ended ended 30 June 30 June 31 December 1999 1998 1998 Euro m Euro m Euro m Turnover (gross billings) 6,833.0 5,790.1 11,817.0 -------------------------------------- Revenue 1,563.8 1,356.3 2,833.7 -------------------------------------- Gross profit 1,323.8 1,160.4 2,411.4 Operating costs (1,138.4) (1,004.1) (2,073.0) -------------------------------------- Operating profit 185.4 156.3 338.4 -------------------------------------- Income from associates 12.7 7.2 23.8 Profit on ordinary activities before interest and taxation 198.1 163.5 362.2 -------------------------------------- Net interest payable and similar charges (25.0) (22.1) (47.9) Profit on ordinary activities before taxation 173.1 141.4 314.3 ------------------------------------- Tax on profit on ordinary activities (53.6) (45.2) (98.9) Profit on ordinary activities after taxation 119.5 96.2 215.4 -------------------------------------- Minority interests (3.7) (3.3) (8.1) -------------------------------------- Profit attributable to ordinary share owners 115.8 92.9 207.3 Ordinary dividends (12.0) (9.3) (29.0) Retained profit for the period 103.8 83.6 178.3 ===================================== Earnings per share (net basis) Basic earnings per ordinary share 15.4c 12.7c 28.2c -------------------------------------- Ordinary dividend per share - interim 1.54c 1.27c 1.24c - final - - 2.54c ====================================== WPP GROUP PLC Unaudited preliminary consolidated balance sheet as at 30 June, 1999 Presented in Euros for illustrative purposes only 30 June 1999 30 June 1998 31 December 1998 Euro m Euro m Euro m Fixed assets Intangible assets: Corporate brands 535.0 531.9 495.9 Goodwill 312.0 120.7 223.9 Tangible assets 272.2 221.3 236.2 Investments 444.3 111.4 380.0 ----------------------------------------- 1,563.5 985.3 1,336.0 Current assets Stocks and work in progress 214.3 189.7 152.0 Debtors 1,617.2 1,394.9 1,265.4 Debtors within working capital facility: Gross debts 498.3 457.1 417.3 Non-returnable proceeds (335.5) (317.3) (296.4) 162.8 139.8 120.9 Cash at bank and in hand 462.7 337.2 600.6 ----------------------------------------- 2,457.0 2,061.6 2,138.9 Creditors: amounts falling due within one year (2,822.5) (2,387.1) (2,518.3) ----------------------------------------- Net current liabilities (365.5) (325.5) (379.4) Total assets less current---------------------------------------- liabilities 1,198.0 659.8 956.6 Creditors: amounts falling due after more than one year (716.3) (525.4) (568.9) Provisions for liabilities and charges (122.3) (103.8) (110.4) ---------------------------------------- Net assets 359.4 30.6 277.3 ---------------------------------------- Capital and reserves Share capital 117.7 111.7 108.5 Reserves 228.7 (93.4) 157.4 -------------------------------------- Share owners funds 346.4 18.3 265.9 Minority interests 13.0 12.3 11.4 --------------------------------------- Total capital employed 359.4 30.6 277.3 =======================================

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