17th Aug 2007 07:01
WPP Group PLC17 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 +/(-)% +/(-)% £mBillings 15,084.6 14,407.1 4.7 10.1 30,140.7================== ====== ========== ========= ======= ======== ========== Revenue 2,921.0 2,864.4 2.0 7.7 5,907.8Direct costs (151.3) (149.2) (1.4) (6.2) (296.8)------------------ ------ ---------- --------- ------- -------- ----------Gross profit 2,769.7 2,715.2 2.0 7.8 5,611.0Operating costs 4 (2,450.2) (2,407.3) (1.8) (7.6) (4,869.4)------------------ ------ ---------- --------- ------- -------- ----------Operating profit 319.5 307.9 3.8 9.3 741.6Share of results ofassociates 4 19.5 25.3 (22.9) (17.9) 41.1------------------ ------ ---------- --------- ------- -------- ----------Profit before interest and taxation 339.0 333.2 1.7 7.3 782.7Finance income 5 57.7 51.0 13.1 17.5 111.0Finance costs 5 (102.6) (97.1) (5.7) (8.0) (211.7)------------------ ------ ---------- --------- ------- -------- ----------Profit before taxation 294.1 287.1 2.4 8.9 682.0Taxation 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 11.7 435.8Minority 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 12.1 859.0Headline 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 earningsper ordinary share 9 15.3p 14.7p 4.1 13.2 36.3pDiluted earnings perordinary share 9 14.7p 14.3p 2.8 11.7 35.2p ------------------ ------ ---------- --------- ------- -------- ---------- * 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. 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 £mNet cash (outflow)/inflowfrom operating activities 10 (7.2) (26.8) 661.4Investing activitiesAcquisitions 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 ofproperty, plant and equipment 6.6 4.8 22.4--------------------------------- ------ -------- --------- ---------Net cash outflow from investing activities (273.6) (193.5) (377.7)Financing activitiesShare option proceeds 21.4 49.5 70.9Share repurchases and buybacks 10 (209.2) (161.5) (257.7)Net increase/(decrease) in borrowings 10 111.8 273.0 382.1Financing and share issue costs (1.9) (0.9) (3.7)Equity dividends paid - - (118.9)Dividends paid to minority shareholders insubsidiary undertakings (20.4) (15.3) (28.8)--------------------------------- ------ -------- --------- ---------Net cash (outflow)/inflow from financing activities (98.3) 144.8 43.9Net (decrease)/increasein cash and cash equivalents (379.1) (75.5) 327.6Translation differences 2.4 (113.7) (50.3)Cash and cash equivalents at beginning of period 956.9 679.6 679.6--------------------------------- ------ -------- --------- ---------Cash and cash equivalentsat end of period 10 580.2 490.4 956.9--------------------------------- ------ -------- --------- ---------Reconciliation of net cash flow tomovement in net debt:Net (decrease)/increasein cash and cash equivalents (379.1) (75.5) 327.6Cash (inflow)/outflowfrom (increase)/decrease in debt financing (109.9) (272.9) (380.1)Other movements 48.7 9.9 9.3Translation 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 £mProfit for the period 203.2 195.4 482.6------------------------------ ----------- ----------- -----------Exchange adjustments on foreign currencynet investments (33.1) (210.9) (367.0)Revaluation of other investments (2.6) 2.7 9.5Actuarial gain on defined benefit pensionschemes - - 26.0Deferred tax on defined benefit pensionschemes - - 5.3------------------------------ ----------- ----------- -----------Net expense recognised directly in equity (35.7) (208.2) (326.2)Total recognised income and expenserelating to the period 167.5 (12.8) 156.4------------------------------ ----------- ----------- -----------Attributable to:Equity holders of the parent 146.2 (31.5) 109.6Minority 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 £mNon-current assetsIntangible assets:Goodwill 12 5,530.8 5,492.7 5,434.5Other 13 1,087.5 1,178.7 1,115.4Property, plant and equipment 417.5 410.0 415.3Interests in associates 451.4 443.0 411.4Other investments 162.2 119.7 136.5Deferred tax assets 105.4 111.4 108.9Trade and other receivables 94.3 123.9 110.3-------------------------- ------ ----------- ----------- ----------- 7,849.1 7,879.4 7,732.3Current assetsInventory and work in progress 324.4 365.3 341.5Corporate income tax recoverable 28.6 23.0 26.5Trade and other receivables 5,205.7 4,630.8 4,931.9Cash and short-term deposits 755.5 854.8 1,663.7-------------------------- ------ ----------- ----------- ----------- 6,314.2 5,873.9 6,963.6Current liabilitiesTrade 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 liabilitiesBonds 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-------------------------- ------ ----------- ----------- ----------- EquityCalled-up share capital 121.8 124.9 124.1Share premium account 97.3 52.6 74.9Shares to be issued 3.4 15.7 7.5Merger 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 3,826.9Minority 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 convertibledebenture. This was classified as a non-current liability in June 2006, but thedirectors now consider this liability to be current as the holders of the bondcan convert at any time. The June 2006 comparative figures have beenreclassified 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 thehistorical cost convention, except for the revaluation of certain financialinstruments as disclosed in our accounting policies. 2. Accounting policies The unaudited consolidated interim 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 in the period to 30 June 2007. Statutory Information and Independent Review The unaudited consolidated interim financial statements for the six months to 30June 2007 and 30 June 2006 do not constitute statutory accounts. The financialinformation for the year ended 31 December 2006 does not constitute statutoryaccounts for the purposes of s240 of the Companies Act 1985. The statutoryaccounts for the year ended 31 December 2006 have been delivered to theRegistrar of Companies and received an unqualified auditors' report and did notcontain a statement under s237(2) or (3) of the Companies Act 1985. The interimfinancial statements are unaudited but have been reviewed by the auditors andtheir report is set out on page 29. The announcement of the interim results was approved by the board of directorson 16 August 2007. 3. Currency conversion The reporting currency of the Group is the pound sterling and the unauditedconsolidated 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 beenprepared using the exchange rate on that day of US$2.0071 to the pound (30 June2006: US$1.8469; 31 December 2006: US$1.9569). The basis for calculating the constant currency percentage changes, shown on theface of the unaudited consolidated interim income statement, is described in theglossary 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 £mAmortisation and impairment ofacquired intangible assets 17.1 23.0 43.3Goodwill impairment 29.0 10.0 35.5Goodwill write-down relating toutilisation of pre-acquisitiontax losses 1.0 3.0 8.8Gains on disposal of investments (3.0) (4.2) (7.3)Share-based incentive plans(including share options) 33.3 37.9 70.9Other 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 ofunder-performing businesses in the Group. In certain markets, the impact ofcurrent local economic conditions and trading circumstances on these businessesis sufficiently severe to indicate an impairment to the carrying value ofgoodwill. The Directors will reassess the need for any further impairmentwrite-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 £mShare of profit before interest and taxation 31.5 34.4 61.4Share of exceptional gains - 4.0 4.0Share of interest and minority interest 0.7 0.6 0.9Share 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 £mExpected return on pension scheme assets 14.1 13.0 25.2Investment income 4.0 0.5 5.7Interest 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 £mInterest on pension scheme liabilities 17.0 16.5 32.4Interest payable and similar charges 85.8 79.4 171.3-------------------------------- ---------- ---------- ----------Finance charges (excludingrevaluation of financial instruments) 102.8 95.9 203.7Revaluation 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 shownabove: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006-------------------------------- ---------- ---------- ---------- £m £m £mMovements in fair value oftreasury instruments 0.4 2.9 3.3Revaluations of put options overminority 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 £mRevenueAdvertising and Media InvestmentManagement 1,364.4 1,354.4 2,806.9Information, Insight & Consultancy 431.8 438.9 892.9Public Relations & Public Affairs 313.0 290.3 595.7Branding & Identity, Healthcareand Specialist Communications 811.8 780.8 1,612.3-------------------------------- ---------- ---------- ---------- 2,921.0 2,864.4 5,907.8-------------------------------- ---------- ---------- ---------- Headline PBIT*Advertising and Media InvestmentManagement 201.1 190.3 443.7Information, Insight & Consultancy 42.0 41.5 98.7Public Relations & Public Affairs 46.0 40.3 89.5Branding & Identity, Healthcareand Specialist Communications 94.0 88.9 227.1-------------------------------- ---------- ---------- ---------- 383.1 361.0 859.0-------------------------------- ---------- ---------- ---------- Headline PBIT margin % % %Advertising and Media InvestmentManagement 14.7 14.1 15.8Information, Insight & Consultancy 9.7 9.5 11.1Public Relations & Public Affairs 14.7 13.9 15.0Branding & Identity, Healthcareand 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 £mRevenueUnited Kingdom 430.4 415.1 856.3North America 1,111.6 1,135.5 2,291.1Continental Europe 771.6 741.4 1,532.9Asia 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 97.9North America 175.8 176.1 389.0Continental Europe 90.2 85.8 194.3Asia 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 11.4North America 15.8 15.5 17.0Continental Europe 11.7 11.6 12.7Asia 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 31December 2006: 26.0%). The Group tax rate on Reported PBT is 30.9% (30 June 2006: 31.9% and 31 December2006: 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 £mCurrent taxUK Corporation tax at 30%Current year 11.0 16.6 36.6Prior years 2.4 (4.7) (44.9)------------------------------ ---------- ---------- ---------- 13.4 11.9 (8.3)Foreign taxCurrent year 84.7 80.9 216.9Prior years (3.2) - (7.6)------------------------------ ---------- ---------- ---------- 81.5 80.9 209.3------------------------------ ---------- ---------- ----------Total Current tax 94.9 92.8 201.0------------------------------ ---------- ---------- ----------Deferred taxCurrent 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) perordinary share. This is expected to be paid on 12 November 2007 to share ownerson the register at 12 October 2007. The Board recommended a final dividend of 7.61p per ordinary share in respect of2006. This was approved by the company's shareholders at the Annual GeneralMeeting 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) 181.9 176.7 435.8Headline 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 36.3pHeadline EPS 19.0p 17.1p 11.1 20.4 43.3p----------------------- --------- --------- ------ ------- ----------- * Reported earnings is equivalent to profit for the period attributable toequity 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 Reportedearnings (£m) 182.4 177.2 436.9Diluted Headline earnings (£m) 226.3 206.2 521.2----------------------- --------- --------- ------- ------- ----------Shares used in diluted EPScalculation (m) 1,242.8 1,243.5 1,242.2----------------------- --------- --------- ------- ------- ----------Diluted Reported EPS 14.7p 14.3p 2.8 11.7 35.2pDiluted Headline EPS 18.2p 16.6p 9.6 18.8 42.0p----------------------- --------- --------- ------- ------- ---------- Diluted EPS has been calculated based on the Reported and Headline Earningsamounts above. For the six months ended 30 June 2007 and the six months ended 30June 2006 the $150 million Grey convertible was dilutive and earnings wereconsequently increased by £0.5 million. For the six months ended 30 June 2006,the £450 million convertible bonds were accretive to earnings and thereforeexcluded from the calculation of dilutive earnings; these bonds were redeemed ontheir due date of 11 April 2007. A reconciliation between the shares used in calculating Basic and Diluted EPS isas follows:------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006------------------------------- ---------- ---------- ---------- m m mAverage shares used in Basic EPScalculation 1,189.5 1,205.2 1,201.0Dilutive share optionsoutstanding 20.4 18.0 14.9Other potentially issuable shares 24.0 11.4 17.4$150 million Grey convertiblebonds 8.9 8.9 8.9------------------------------- ---------- ---------- ----------Shares used in Diluted EPScalculation 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 flowheadings 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 £mProfit for the period 203.2 195.4 482.6Taxation 90.9 91.7 199.4Finance costs 102.6 97.1 211.7Finance income (57.7) (51.0) (111.0)Share of results of associates (19.5) (25.3) (41.1)----------------------------------- --------- --------- ---------Operating profit 319.5 307.9 741.6Adjustments for:Share-based incentive plans (includingshare options) 33.3 37.9 70.9Depreciation of property, plant andequipment 60.7 60.8 129.1Goodwill impairment 29.0 10.0 35.5Goodwill write-down relating toutilisation of pre-acquisition tax losses 1.0 3.0 8.8Amortisation and impairment of acquiredintangible assets 17.1 23.0 43.3Amortisation of other intangible assets 8.7 6.1 13.5Gains 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 inworking capital and provisions 464.4 444.3 1,031.7Movements in working capital andprovisions (348.7) (375.4) (171.1)----------------------------------- --------- --------- ---------Cash generated by operations 115.7 68.9 860.6Corporation 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 75.2Investment income 4.0 - 2.4Dividends 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 £mInitial cash consideration (80.3) (50.0) (120.5)Cash and cash equivalentsacquired (net) 9.2 15.6 21.4Earnout 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 ofinvestments 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 £mShare cancellations (excludingbrokerage 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 £mIncrease/(decrease) in drawingson bank loans 161.8 273.0 (21.8)Repayment of £450 millionconvertible bonds (450.0) - -Proceeds from issue of £400million bonds 400.0 - -Proceeds from issue of €600million 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 £mCash at bank and in hand 638.1 741.2 1,476.8Short-term bank deposits 117.4 113.6 186.9Overdrafts* (175.3) (364.4) (706.8)-------------------------------- ---------- ---------- ---------- 580.2 490.4 956.9-------------------------------- ---------- ---------- ---------- * Bank overdrafts are included in cash and cash equivalents because they form anintegral part of the Group's cash management. 11. Net debt -------------------------------- ---------- ---------- ---------- 30 June 30 June 31 December 2007 2006 2006-------------------------------- ---------- ---------- ---------- £m £m £mCash and short-term deposits 755.5 854.8 1,663.7Bank loans and overdrafts due withinone year (410.6) (924.8) (1,260.6)Corporate bond and loans due after oneyear (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 (30June 2006: decrease of £182.5 million) in the period. This movement includesboth additional goodwill arising on acquisitions completed in the period andadjustments to goodwill relating to acquisitions completed in prior years, netof impairment charges and the effect of currency translation. Goodwill inrelation 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 earnoutobligations totalled £284.5 million (period ended 30 June 2006: £167.7 million;year ended 31 December 2006: £235.5 million). Earnouts are based on thedirectors' best estimates of future obligations, which are dependent on thefuture performance of the interests acquired and assume the operating companiesimprove profits in line with directors' estimates. The contribution to revenue and operating profit of acquisitions completed inthe six months ended 30 June 2007 was not material. The Group completed the acquisition of 24/7 Real Media, Inc. on 2 July 2007 fortotal consideration of approximately $650 million. The company will beconsolidated 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 £mBrands with an indefinite useful life 800.4 853.0 811.4Acquired intangibles 256.4 296.8 271.9Other (including capitalised computersoftware) 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 oneyear: -------------------------------- ---------- --------- ---------- 30 June 30 June 31 December 2007 2006 2006-------------------------------- ---------- --------- ---------- £m £m £mTrade payables 4,600.8 4,250.2 4,743.6Deferred income 534.7 584.0 510.8Payments due to vendors 55.8 46.0 87.9Loan notes due to vendors 0.7 2.1 1.8Liabilities in respect of put optionagreements with vendors 42.9 50.2 51.1Share repurchases - close periodcommitments 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 morethan one year: -------------------------------- ---------- --------- ---------- 30 June 30 June 31 December 2007 2006 2006-------------------------------- ---------- --------- ---------- £m £m £mPayments due to vendors 228.7 121.7 147.6Liabilities in respect of put optionagreements with vendors 25.9 40.4 28.8Other 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 deferredconsideration and the directors' best estimates of future earnout relatedobligations: -------------------------------- ---------- --------- ---------- 30 June 30 June 31 December 2007 2006 2006-------------------------------- ---------- --------- ---------- £m £m £mWithin one year 55.8 46.0 87.9Between 1 and 2 years 42.8 43.8 36.1Between 2 and 3 years 63.6 26.4 34.6Between 3 and 4 years 64.1 27.9 49.1Between 4 and 5 years 39.6 18.8 27.8Over 5 years 18.6 4.8 --------------------------------- ---------- --------- ---------- 284.5 167.7 235.5-------------------------------- ---------- --------- ---------- The Group does not consider there to be any material contingent liabilities asat 30 June 2007. Note 12 includes details of a material acquisition which hasbeen 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 £mProfit for the periodattributable to equity share owners 181.9 176.7 435.8Ordinary dividends (89.6) (76.1) (118.9)-------------------------------- --------- ---------- ---------- 92.3 100.6 316.9Ordinary shares issued in respectof acquisitions 2.3 - -Other ordinary shares issued 20.3 48.4 73.0Share 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 70.9Tax benefit of share-basedpayments 7.0 10.1 32.3Actuarial gain on defined benefitschemes - - 26.0Deferred tax on defined benefitpension schemes - - 5.3Exchange adjustments on foreigncurrency net investments (33.1) (210.9) (367.0)Financial instruments - movementsduring the period 10.5 (2.3) 14.9Share repurchases - close periodcommitments* (61.0) - -Revaluation of other investments (2.6) 2.7 9.5Other movements - 0.8 --------------------------------- --------- ---------- ----------Net (deductions)/additions toequity 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 toconduct share buybacks on the Company's behalf in the close period commencing on2 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 agreementconstitutes a financial liability at 30 June 2007 which must be recognised atfair 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 inequity. 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 1,252,899.4Exercise of share options 4,994.4 14,764.2 20,984.1Acquisitions 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 £mProfit before interest and taxation 339.0 333.2 782.7Amortisation and impairment ofacquired intangible assets 17.1 23.0 43.3Goodwill impairment 29.0 10.0 35.5Goodwill write-down relating toutilisation of pre-acquisition tax losses 1.0 3.0 8.8Gains 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 51.0 111.0Finance charges (excludingrevaluation of financialinstruments) (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 £mHeadline PBIT (as above) 383.1 361.0 859.0Depreciation of property, plantand equipment 60.7 60.8 129.1Amortisation of other intangibleassets 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 £mProfit before taxation 294.1 287.1 682.0 Amortisation and impairment ofacquired intangible assets 17.1 23.0 43.3Goodwill impairment 29.0 10.0 35.5Goodwill write-down relating toutilisation of pre-acquisition tax losses 1.0 3.0 8.8Gains 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 2,864.4Headline 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 £mCash generated by operations 115.7 68.9 860.6Plus:Interest received 17.4 39.5 75.2Investment income 4.0 - 2.4Dividends from associates 16.2 11.0 20.3Share option proceeds 21.4 49.5 70.9Proceeds on disposal of property,plant and equipment 6.6 4.8 22.4Gains on sale of property, plantand equipment 1.9 0.2 3.7Movements in working capital andprovisions 348.7 375.4 171.1Less:Interest and similar charges paid (84.3) (76.9) (135.1)Purchases of property, plant andequipment (66.1) (66.6) (167.8)Purchases of other intangibleassets (including capitalisedcomputer software) (6.1) (6.9) (16.7)Corporation and overseas tax paid (76.2) (69.3) (162.0)Dividends paid to minorityshareholders in subsidiaryundertakings (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 forthe six months ended 30 June 2007 which comprise the consolidated incomestatement, the consolidated statement of recognised income and expense, theconsolidated cash flow statement, the consolidated balance sheet and relatednotes 1 to 17. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) 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 thatshould be made to the financial information as presented for the six monthsended 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 +/(-)% $mBillings 29,747.8 25,823.5 15.2 55,435.0================== ========== ========== ======== ============ Revenue 5,764.3 5,132.6 12.3 10,910.9Direct costs (299.1) (266.9) (12.1) (547.2)------------------ ---------- ---------- -------- ------------Gross profit 5,465.2 4,865.7 12.3 10,363.7Operating costs (4,833.2) (4,310.8) (12.1) (8,982.8)------------------ ---------- ---------- -------- ------------Operating profit 632.0 554.9 13.9 1,380.9Share of results of associates 38.3 45.6 (16.0) 76.3------------------ ---------- ---------- -------- ------------Profit before interest andtaxation 670.3 600.5 11.6 1,457.2Finance income 112.4 90.0 24.9 200.9Finance costs (201.0) (172.4) (16.6) (386.9)------------------ ---------- ---------- -------- ------------Profit before taxation 581.7 518.1 12.3 1,271.2Taxation (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 12.8 812.4Minority 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 1,600.9Headline 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 80.9cDiluted earnings per ordinary share 36.0c 29.9c 20.4 78.4c------------------ ---------- ---------- -------- ------------ * 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$1.9703 to the pound for the period ended 30 June 2007 (period ended30 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 Headlineearnings 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 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