29th Feb 2008 07:01
WPP Group PLC29 February 2008 WPP GROUP PLC Preliminary results for the year ended 31 December 2007 Unaudited preliminary consolidated income statement for the year ended 31 December 2007 Notes 2007 2006 Constant £m £m +/(-)% Currency* +/(-)%Billings 31,665.5 30,140.7 5.1 8.6 Revenue 6,185.9 5,907.8 4.7 8.2Direct costs (335.5) (296.8) (13.0) (15.9)Gross profit 5,850.4 5,611.0 4.3 7.8Operating costs 4 (5,045.7) (4,869.4) (3.6) (7.4)Operating profit 804.7 741.6 8.5 10.3Share of results of associates 4 41.4 41.1 0.7 4.4Profit before interest and 846.1 782.7 8.1 10.0taxationFinance income 5 139.4 111.0 25.6 29.0Finance costs 5 (266.1) (211.7) (25.7) (27.7)Profit before taxation 719.4 682.0 5.5 7.4Taxation 7 (204.3) (199.4) (2.5) (0.8)Profit for the year 515.1 482.6 6.7 10.2 Attributable to:Equity holders of the parent 465.9 435.8 6.9 10.8Minority interests 49.2 46.8 (5.1) (5.6) 515.1 482.6 6.7 10.2 Headline PBIT 6,18 928.0 859.0 8.0 10.1Headline PBIT margin 18 15.0% 14.5%Headline PBT 18 817.3 766.3 6.7 8.8 Earnings per share**Basic earnings per ordinary 9 39.6 36.3 9.1 13.0shareDiluted earnings per ordinary 9 38.0 35.2 8.0 12.0share * The basis for calculating the constant currency percentage change shown aboveis described in the glossary attached to this appendix. ** The calculations of the Group's earnings per share and Headline earnings pershare are set out in note 9. WPP GROUP PLC Unaudited preliminary consolidated cash flow statement for the year ended 31 December 2007 Notes 2007 2006 £m £mNet cash inflow from operating activities 10 891.3 661.4Investing activitiesAcquisitions and disposals 10 (674.8) (215.6)Purchase of property, plant and equipment (151.1) (167.8)Purchase of other intangible assets (incl. (19.7) (16.7)capitalised computer software)Proceeds on disposal of property, plant and 8.3 22.4equipmentNet cash outflow from investing activities (837.3) (377.7)Financing activitiesIssue of shares 34.8 70.9Share repurchases and buybacks 10 (415.4) (257.7)Net increase in borrowings 10 498.9 382.1Financing and share issue costs (8.3) (3.7)Equity dividends paid (138.9) (118.9)Dividends paid to minority shareholders in (38.9) (28.8)subsidiary undertakingsNet cash (outflow)/ inflow financing activities (67.8) 43.9Net (decrease)/increase cash and cash equivalents (13.8) 327.6Translation differences 119.2 (50.3)Cash and cash equivalents at beginning of year 956.9 679.6Cash and cash equivalents at end of year 10 1,062.3 956.9Reconciliation of net cash flow to movement in netdebt:Net (decrease)/increase in cash and cash (13.8) 327.6equivalentsCash outflow from decrease in debt financing (493.5) (380.1)Other movements 26.0 9.3Translation difference 10.2 32.6Movement of net debt in the year (471.1) (10.6)Net debt at beginning of year (814.6) (804.0)Net debt at end of year 11 (1,285.7) (814.6) WPP GROUP PLC Unaudited preliminary consolidated statement of recognised income and expense for the year ended 31 December 2007 2007 2006 £m £mProfit for the year 515.1 482.6Exchange adjustments on foreign currency net investments 71.7 (367.0)Revaluation of other investments 108.1 9.5Actuarial gain on defined benefit pension schemes 27.0 26.0Deferred tax on defined benefit pension schemes (9.9) 5.3Net income/(expense) recognised directly in equity 196.9 (326.2)Total recognised income and expense relating to the year 712.0 156.4 Attributable to:Equity holders of the parent 662.8 109.6Minority interests 49.2 46.8 712.0 156.4 WPP GROUP PLC Unaudited preliminary consolidated balance sheet as at 31 December 2007 Notes 2007 2006 £m £mNon-current assetsIntangible assets:Goodwill 12 6,071.7 5,434.5Other 13 1,154.6 1,115.4Property, plant and equipment 449.6 415.3Interests in associates 540.1 411.4Other investments 268.6 136.5Deferred tax assets 56.0 108.9Trade and other receivables 14 149.3 110.3 8,689.9 7,732.3Current assetsInventory and work in progress 343.9 341.5Corporate income tax recoverable 37.2 26.5Trade and other receivables 14 6,140.8 4,931.9Cash and short-term deposits 2,040.2 1,663.7 8,562.1 6,963.6Current liabilitiesTrade and other payables 15 (8,248.9) (6,783.8)Corporate income tax payable (70.0) (39.6)Bank overdrafts and loans (1,585.9) (1,260.6) (9,904.8) (8,084.0)Net current liabilities (1,342.7) (1,120.4)Total assets less current liabilities 7,347.2 6,611.9 Non-current liabilitiesBonds and bank loans (1,740.0) (1,217.7)Trade and other payables 16 (460.4) (331.9)Corporate income tax payable (336.2) (383.7)Deferred tax liabilities (464.0) (467.8)Provisions for post-employment benefits (135.0) (187.6)Provisions for liabilities and charges (116.8) (104.8) (3,252.4) (2,693.5)Net assets 4,094.8 3,918.4 EquityCalled-up share capital 119.2 124.1Share premium account 103.9 74.9Shares to be issued 5.3 7.5Merger reserve (1,365.9) (1,370.0)Other reserves (114.9) (170.1)Own shares (255.3) (288.5)Retained earnings 5,482.1 5,449.0Equity share owners' funds 17 3,974.4 3,826.9Minority interests 120.4 91.5Total equity 4,094.8 3,918.4 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements 1. Basis of accounting The unaudited preliminary consolidated financial statements are prepared underthe historical cost convention, except for the revaluation of certain financialinstruments as disclosed in our accounting policies. 2. Accounting policies The unaudited preliminary consolidated financial statements comply with therecognition and measurement criteria of International Financial ReportingStandards (IFRS), and with the accounting policies of the Group which were setout on pages 143 to 148 of the 2006 Annual Report and Accounts. No changes havebeen made to the Group's accounting policies since this time. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The Company's 2007 Annual Report andAccounts will be prepared in compliance with IFRS as endorsed by the EuropeanUnion. Statutory Information The financial information for the years ended 31 December 2007 and 2006 does notconstitute statutory accounts for the purposes of s240 of the Companies Act1985. The statutory accounts for the year ended 31 December 2006 have beendelivered to the Registrar of Companies and received an unqualified auditors'report and did not contain a statement under s237 (2) or (3) of the CompaniesAct 1985. The statutory accounts for the year ended 31 December 2007 will befinalised on the basis of the financial information presented by the directorsin this unaudited preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. The auditreport for the year ended 31 December 2007 has yet to be signed. The announcement of the preliminary results was approved by the board ofdirectors on 28 February 2008. 3. Currency conversion The 2007 unaudited preliminary consolidated income statement is prepared using,among other currencies, an average exchange rate of US$2.0019 to the pound(2006: US$1.8432). The unaudited preliminary consolidated balance sheet as at 31December 2007 has been prepared using the exchange rate on that day of US$1.9827to the pound (2006: US$1.9569). The basis for calculating the constant currency percentage changes, shown on theface of the unaudited preliminary consolidated income statement, is described inthe glossary attached to this appendix. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 4. Operating costs and share of results of associates Operating costs include: 2007 2006 £m £mAmortisation and impairment of acquired intangible 40.3 43.3assetsGoodwill impairment 44.1 35.5Goodwill write-down relating to utilisation of 1.7 8.8pre-acquisition tax lossesGains on disposal of investments (3.4) (7.3)Share-based incentive plans 62.4 70.9Other operating costs 4,900.6 4,718.2 5,045.7 4,869.4 The goodwill impairment charge of £44.1 million (2006: £35.5 million) relates toa number of under-performing businesses in the Group. In certain markets, theimpact of current, local economic conditions and trading circumstances on thesebusinesses is sufficiently severe to indicate impairment to the carrying valueof goodwill. Operating profit includes credits totalling £16.8 million (2006: £10.6 million)relating to the release of excess provisions and other balances established inrespect of acquisitions completed prior to 2006. Share of results of associates include: 2007 2006 £m £mShare of profit before interest and taxation 65.8 61.4Share of exceptional gains 0.8 4.0Share of interest and minority interest 0.5 0.9Share of taxation (25.7) (25.2) 41.4 41.1 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 5. Finance income and finance costs Finance income includes: 2007 2006 £m £mExpected return on pension scheme assets 28.1 25.2Investment income 9.2 5.7Interest income 102.1 80.1 139.4 111.0 Finance costs include: 2007 2006 £m £mInterest on pension scheme liabilities 33.8 32.4Interest payable and similar charges 216.3 171.3Finance charges (excluding revaluation of financial 250.1 203.7instruments)Revaluation of financial instruments 16.0 8.0 266.1 211.7 The following are included in the revaluation of financial instruments shownabove: 2007 2006 £m £mMovements in fair value of treasury instruments 6.7 3.3Revaluation of put options over minority interests 9.3 4.7 16.0 8.0 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 6. Segmental analysis Reported contributions by operating sector were as follows: 2007 2006 £m £mRevenueAdvertising and Media Investment Management 2,871.3 2,806.9Information, Insight & Consultancy 905.4 892.9Public Relations & Public Affairs 641.4 595.7Branding & Identity, Healthcare and Specialist 1,767.8 1,612.3Communications 6,185.9 5,907.8 Headline PBIT *Advertising and Media Investment Management 466.9 443.7Information, Insight & Consultancy 104.3 98.7Public Relations & Public Affairs 106.5 89.5Branding & Identity, Healthcare and Specialist 250.3 227.1Communications 928.0 859.0 Headline PBIT Margin % %Advertising and Media Investment Management 16.3 15.8Information, Insight & Consultancy 11.5 11.1Public Relations & Public Affairs 16.6 15.0Branding & Identity, Healthcare and Specialist 14.2 14.1Communications 15.0 14.5 * Headline PBIT is defined in note 18. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 6. Segmental analysis (continued) Reported contributions by geographical area were as follows: 2007 2006 £m £mRevenueUnited Kingdom 890.3 856.3North America 2,266.7 2,291.1Continental Europe 1,657.4 1,532.9Asia Pacific, Latin America, Africa & Middle East 1,371.5 1,227.5 6,185.9 5,907.8 Headline PBIT*United Kingdom 107.1 97.9North America 391.5 389.0Continental Europe 223.0 194.3Asia Pacific, Latin America, Africa & Middle East 206.4 177.8 928.0 859.0 Headline PBIT Margin % %United Kingdom 12.0 11.4North America 17.3 17.0Continental Europe 13.5 12.7Asia Pacific, Latin America, Africa & Middle East 15.0 14.5 15.0 14.5 *Headline PBIT is defined in note 18. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 7. Taxation The Group tax rate on Headline PBT* is 25.0% (2006: 26.0%). The Group tax rateon Reported PBT is 28.4% (2006: 29.2%). The tax charge comprises: 2007 2006 £m £mCurrent taxUK Corporation tax at 30%Current year 27.5 36.6Prior years (57.9) (44.9) (30.4) (8.3)Foreign taxCurrent year 212.9 216.9Prior years 5.7 (7.6) 218.6 209.3Total Current tax 188.2 201.0Deferred tax 16.1 (1.6)Tax expense 204.3 199.4 * Headline PBT is defined in note 18. 8. Ordinary dividends The Board has recommended a final dividend of 9.13p (2006: 7.61p) per ordinaryshare in addition to the interim dividend paid of 4.32p (2006: 3.60p) perordinary share. This makes a total for the year of 13.45p (2006: 11.21p) perordinary share, an increase of 20%. The final dividend is expected to be paid on7 July 2008 to share owners on the register at 6 June 2008. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 9. Earnings per share Basic EPS The calculation of basic Reported and Headline EPS is as follows: 2007 2006 +/(-)% Constant Currency +/(-)%Reported earnings* (£m) 465.9 435.8 6.9 10.8Headline earnings (£m) (note 18) 563.8 520.1 8.4 12.3Average shares used in Basic EPS 1,176.9 1,201.0calculation (m)Reported EPS 39.6p 36.3p 9.1 13.0Headline EPS 47.9p 43.3p 10.6 14.6 * Reported earnings is equivalent to profit for the year attributable to equityholders of the parent. Diluted EPS The calculation of diluted Reported and Headline EPS is set out below: 2007 2006 +/(-)% Constant Currency +/(-)%Diluted Reported earnings (£m) 466.8 436.9 6.8 10.7Diluted Headline earnings (£m) 564.7 521.2 8.3 12.2Shares used in diluted EPS 1,227.1 1,242.2calculation (m)Diluted Reported EPS 38.0p 35.2p 8.0 12.0Diluted Headline EPS 46.0p 42.0p 9.5 13.6 Diluted EPS has been calculated based on the Reported and Headline Earningsamounts above. For the year ended 31 December 2007 and the year ended 31December 2006 the $150 million Grey convertible bonds were dilutive and earningswere consequently increased by £0.9 million and £1.1 million respectively forthe purpose of this calculation. For the year ended 31 December 2007 and theyear ended 31 December 2006, the £450 million convertible bonds were accretiveto 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 isas follows: 2007 2006 m mAverage shares used in Basic EPS calculation 1,176.9 1,201.0Dilutive share options outstanding 16.6 14.9Other potentially issuable shares 24.7 17.4$150 million Grey convertible bonds 8.9 8.9Shares used in Diluted EPS calculation 1,227.1 1,242.2 At 31 December 2007 there were 1,191,491,263 (2006: 1,240,605,187) ordinaryshares in issue. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 10. Analysis of cash flows The following tables analyse the items included within the main cash flowheadings on page 14: Net cash inflow from operating activities: 2007 2006 £m £mProfit for the year 515.1 482.6Taxation 204.3 199.4Finance costs 266.1 211.7Finance income (139.4) (111.0)Share of results of associates (41.4) (41.1)Operating profit 804.7 741.6Adjustments for:Non cash share-based incentive plans (including share 62.4 70.9options)Depreciation of property, plant and equipment 126.3 129.1Goodwill impairment 44.1 35.5Goodwill write-down relating to utilisation of 1.7 8.8pre-acquisition tax lossesAmortisation and impairment of acquired intangible 40.3 43.3assetsAmortisation of other intangible assets 18.1 13.5Gains on disposal of investments (3.4) (7.3)Losses/(gains) on sale of property, plant and equipment 1.0 (3.7)Operating cash flow before movements in working capital 1,095.2 1,031.7and provisionsMovements in working capital and provisions 25.4 (171.1)Cash generated by operations 1,120.6 860.6Corporation and overseas tax paid (151.0) (162.0)Interest and similar charges paid (212.0) (135.1)Interest received 102.6 75.2Investment income 3.1 2.4Dividends received from associates 28.0 20.3 891.3 661.4 Acquisitions and disposals: 2007 2006 £m £mInitial cash consideration (520.4) (120.5)Cash and cash equivalents acquired (net) 60.5 21.4Earnout payments (93.9) (91.6)Loan note redemptions (2.1) (11.7)Purchase of other investments (including associates) (128.0) (28.7)Proceeds on disposal of investments 9.1 15.5 (674.8) (215.6) WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 10. Analysis of cash flows (continued) Share repurchases and buybacks: 2007 2006 £m £mShare cancellations (excluding brokerage fees) (402.7) (218.8)Purchase of own shares by ESOP trusts - (38.9)Shares purchased into treasury (12.7) - (415.4) (257.7) Net increase in borrowings: 2007 2006 £m £mDecrease in drawings on bank loans - (21.8)Repayment of £450 million 2.0% convertible bonds (450.0) -Proceeds from issue of £400 million 6.0% bonds due 400.0 -April 2017Proceeds from issue of £200 million 6.375% bonds due 200.0 -November 2020 Proceeds from issue of €500 million 5.25% bonds due 348.9 -January 2015Proceeds from issue of €600 million 4.375% Eurobonds - 403.9due December 2013 498.9 382.1 Cash and cash equivalents: 2007 2006 £m £mCash at bank and in hand 1,957.4 1,476.8Short-term bank deposits 82.8 186.9Overdrafts* (977.9) (706.8) 1,062.3 956.9 *Bank overdrafts are included in cash and cash equivalents because they form anintegral part of the Group's cash management. 11. Net debt 2007 2006 £m £mCash and short-term deposits 2,040.2 1,663.7Bank loans and overdrafts due within one year (1,585.9) (1,260.6)Corporate bond and loans due after one year (1,740.0) (1,217.7)Net debt (1,285.7) (814.6) WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 12. Goodwill and acquisitions Goodwill in relation to subsidiary undertakings increased by £637.2 million(2006: decreased by £240.7 million) in the year. This includes both goodwillarising on acquisitions completed in the year and adjustments to goodwillrelating to acquisitions completed in prior years, net of impairment charges andthe effect of currency translation. Goodwill in relation to associateundertakings increased by £79.0 million (2006: decreased by £76.0 million) inthe year. Future anticipated payments to vendors in respect of both deferred and earnoutobligations totalled £319.0 million (2006: £235.5 million). Earnouts are basedon the directors' best estimates of future obligations, which are dependent onthe future performance of the interests acquired and assume the operatingcompanies improve profits in line with directors' estimates. In aggregate, for the year ended 31 December 2007, acquisitions completed in theyear contributed £132.2 million to revenue, £14.7 million to operating profitand £24.7 million to Headline PBIT. 13. Other intangible assets The following are included in other intangibles: 2007 2006 £m £mBrands with an indefinite useful life 798.0 811.4Acquired intangibles 316.8 271.9Other (including capitalised computer software) 39.8 32.1 1,154.6 1,115.4 14. Trade and other receivables Amounts falling due within one year: 2007 2006 £m £mTrade receivables 4,691.0 4,021.4VAT and sales taxes recoverable 86.5 50.0Other debtors 609.8 438.4Prepayments and accrued income 753.5 422.1 6,140.8 4,931.9 Amounts falling due after more than one year: 2007 2006 £m £mOther debtors 129.2 106.6Prepayments and accrued income 20.1 3.7 149.3 110.3 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 15. Trade and other payables: amounts falling due within one year The following are included in trade and other payables falling due within oneyear: 2007 2006 £m £mTrade payables 5,843.6 4,743.6Deferred income 600.5 510.8Payments due to vendors 57.3 87.9Loan notes due to vendors 2.7 1.8Liabilities in respect of put option agreements with 45.0 51.1vendorsShare repurchases - close period commitments (note 17) 64.8 -Other creditors and accruals 1,635.0 1,388.6 8,248.9 6,783.8 16. Trade and other payables: amounts falling due after more than one year The following are included in trade and other payables falling due after morethan one year: 2007 2006 £m £mPayments due to vendors 261.7 147.6Liabilities in respect of put option agreements with 37.0 28.8vendorsOther creditors and accruals 161.7 155.5 460.4 331.9 The following table sets out the directors' best estimates of future deferredand earnout related obligations: 2007 2006 £m £mWithin one year 57.3 87.9Between 1 and 2 years 62.8 36.1Between 2 and 3 years 85.4 34.6Between 3 and 4 years 65.0 49.1Between 4 and 5 years 48.5 27.8Over 5 years - - 319.0 235.5 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 17. Reconciliation of movements in consolidated equity share owners' funds 2007 2006 £m £mProfit for the year attributable to equity share owners 465.9 435.8Ordinary dividends (138.9) (118.9) 327.0 316.9 Ordinary shares issued in respect of acquisitions 8.0 -Other ordinary shares issued 28.2 73.0Share cancellations (402.7) (218.8)Share issue/cancellation costs (2.8) (1.7)Net additions of own shares by ESOP Trusts - (38.9)Shares purchased into treasury (12.7) -Non cash share-based incentive plans (including stock 62.4 70.9options)Tax benefit of share-based payments 0.9 32.3Actuarial gain on defined benefit pension schemes 27.0 26.0Deferred tax on defined benefit pension schemes (9.9) 5.3Exchange adjustments on foreign currency net 71.7 (367.0)investmentsRevaluation of other investments 108.1 9.5Share repurchases - close period commitments* (64.8) -Financial instruments - movements during the year 7.3 14.9Other movements (0.2) -Net additions/(deductions) to equity share owners' 147.5 (77.6)fundsOpening equity share owners' funds 3,826.9 3,904.5Closing equity share owners' funds 3,974.4 3,826.9 * During the year, the Company entered into an arrangement with its broker toconduct share buybacks on the Company's behalf in the close period commencing on2 January 2008 and ending on 28 February 2008, in accordance with UK listingrules. Under IAS 32 and IAS 39, the commitment resulting from this agreementconstitutes a financial liability at 31 December 2007 which must be recognisedat fair value at that date. This liability is included in Trade and otherpayables: amounts falling due within one year and has been recognised as amovement in equity. Issued share capital - movement in the year 2007 2006Number of equity ordinary shares m mAt the beginning of the year 1,240.6 1,252.9Exercise of share options 7.8 21.0Acquisitions 0.3 -Share cancellations (57.2) (33.2)Other - (0.1)At the end of the year 1,191.5 1,240.6 Notes to the unaudited preliminary consolidated financial statements (continued) 18. Non-GAAP measures of performance Reconciliation of profit before interest and taxation to Headline PBIT for the year ended 31 December 2007 2007 2006 £m £mProfit before interest and taxation 846.1 782.7Amortisation and impairment of acquired intangible assets 40.3 43.3Goodwill impairment 44.1 35.5Goodwill write-down relating to utilisation of 1.7 8.8pre-acquisition tax lossesGains on disposal of investments (3.4) (7.3)Share of exceptional gains of associates (0.8) (4.0)Headline PBIT 928.0 859.0 Finance income 139.4 111.0Finance charges (excluding revaluation of financial (250.1) (203.7)instruments) (110.7) (92.7) Interest cover on Headline PBIT 8.4 times 9.3 times Calculation of Headline EBITDA 2007 2006 £m £mHeadline PBIT (as above) 928.0 859.0Depreciation of property, plant and equipment 126.3 129.1Amortisation of other intangible assets 18.1 13.5Headline EBITDA 1,072.4 1,001.6 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 18 Non-GAAP measures of performance (continued) Reconciliation of profit before taxation to Headline PBT and Headline earnings for the year ended 31 December 2007 2007 2006 £m £mProfit before taxation 719.4 682.0 Amortisation and impairment of acquired intangible 40.3 43.3assetsGoodwill impairment 44.1 35.5Goodwill write-down relating to utilisation of 1.7 8.8pre-acquisition tax lossesGains on disposal of investments (3.4) (7.3)Share of exceptional gains of associates (0.8) (4.0)Revaluation of financial instruments 16.0 8.0 Headline PBT 817.3 766.3 Taxation (204.3) (199.4)Minority interests (49.2) (46.8) Headline earnings 563.8 520.1 Ordinary dividends 138.9 118.9 Dividend cover on Headline earnings 4.1 times 4.4 times Headline PBIT margins before and after share of results of associates Margin(%) 2007 Margin(%) 2006 £m £m Revenue 6,185.9 5,907.8Headline PBIT 15.0% 928.0 14.5% 859.0Share of results of associates (excluding 40.6 37.1exceptional gainsHeadline PBIT excluding share of results 14.3% 887.4 13.9% 821.9of associates WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 18. Non-GAAP measures of performance (continued) Reconciliation of free cash flow for the year ended 31 December 2007 2007 2006 £m £mCash generated by operations 1,120.6 860.6Plus:Interest received 102.6 75.2Investment income 3.1 2.4Dividends received from associates 28.0 20.3Issue of shares 34.8 70.9Proceeds on disposal of property, plant and equipment 8.3 22.4Less:(Losses)/gains on sale of property, plant and equipment (1.0) 3.7Movements in working capital and provisions (25.4) 171.1Interest and similar charges paid (212.0) (135.1)Purchase of property, plant and equipment (151.1) (167.8)Purchase of other intangible assets (including (19.7) (16.7)capitalised computer software)Corporation and overseas tax paid (151.0) (162.0)Dividends paid to minority shareholders in subsidiary (38.9) (28.8)undertakingsFree Cash Flow 698.3 716.2 WPP GROUP PLC Preliminary results for the year ended 31 December 2007 in reportable US Dollars* Unaudited illustrative preliminary consolidated income statement for the year ended 31 December 2007 Year Year ended ended 31 December 31 December 2007 2006 +/(-)% $m $m Billings 63,536.8 55,435.0 14.6 Revenue 12,395.4 10,910.9 13.6Direct costs (672.7) (547.2) (22.9)Gross profit 11,722.7 10,363.7 13.1Operating costs (10,104.2) (8,982.8) (12.4)Operating profit 1,618.5 1,380.9 17.2Share of results of associates 82.9 76.3 8.7Profit before interest and taxation 1,701.4 1,457.2 16.8Finance income 280.3 200.9 39.5Finance costs (535.0) (386.9) (38.3)Profit before taxation 1,446.7 1,271.2 13.8Taxation (409.5) (371.6) (10.2)Profit for the year 1,037.2 899.6 15.3 Attributable to:Equity holders of the parent 938.2 812.4 15.5Minority interests 99.0 87.2 13.5 1,037.2 899.6 15.3 Headline PBIT 1,865.0 1,600.9 16.5Headline PBIT margin 15.0% 14.7%Headline PBT 1,642.7 1,430.5 14.8 Reported earnings per share** Basic earnings per ordinary share 79.7c 67.6c 17.9Diluted earnings per ordinary share 76.6c 65.6c 16.8 Headline earnings per share**Basic earnings per ordinary share 96.4c 80.9c 19.2Diluted earnings per ordinary share 92.6c 78.4c 18.1 * The unaudited consolidated income statement above is presented in reportableUS Dollars for information purposes only and has been prepared assuming the USDollar is the reporting currency of the Group, whereby local currency resultsare translated into US Dollars at actual monthly average exchange rates in theperiods presented. Among other currencies, this includes an average exchangerate of US$2.0019 to the pound for the year ended 31 December 2007 (2006:US$1.8432). ** The basis of the calculations of the Group's earnings per share and Headlineearnings per share are set out in note 9 of Appendix 1. WPP GROUP PLC GLOSSARY AND BASIS OF PREPARATION Average net debt Average net debt is calculated as the average daily net bank borrowings of theGroup, derived from the Group's automated banking system. Net debt at a periodend is calculated as the sum of the net bank borrowings of the Group, derivedfrom 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 ofcommission-based / fee-based income together with the total of other feesearned. Net new billings represent the estimated annualised impact on billingsof new business gained from both existing and new clients, net of existingclient business lost. The estimated impact is based upon initial assessments ofthe clients' media budgets, which may not necessarily result in actual billingsof 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 currencyreported results for the current and prior year. This gives a US dollar -denominated income statement and balance sheet which exclude any variancesattributable to foreign exchange rate movements. Free cash flow Free cash flow is calculated as Headline operating profit before non cashcharges for share-based incentive plans, depreciation of property, plant andequipment and amortisation of other intangible assets, including dividendsreceived 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 andsimilar charges paid, dividends paid to minority shareholders in subsidiaryundertakings, purchases of property, plant and equipment and purchases of otherintangible assets. Headline earnings Headline PBT less taxation and minority interests. Headline operating profit / Headline PBIT Profit before finance income/costs, taxation, investment gains, goodwillimpairment and other goodwill write-downs, amortisation and impairment ofacquired intangible assets, and share of exceptional gains of associates. Headline PBT Profit before taxation, investment gains, goodwill impairment and other goodwillwrite-downs, amortisation and impairment of acquired intangible assets, share ofexceptional gains of associates and gains/losses arising from the revaluation offinancial 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 currencyactual results (which include acquisitions from the relevant date of completion)are compared with prior year, constant currency actual results, adjusted toinclude the results of acquisitions for the commensurate period in the prioryear. 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 ExchangeRelated Shares:
WPP