18th Aug 2006 07:01
WPP Group PLC18 August 2006 WPP GROUP PLC Interim results for the six months ended 30 June 2006 Unaudited consolidated interim income statement for the six months ended 30 June 2006 ----------------- ------ ---------- --------- ------- -------- ---------- Notes Six months Six months Constant Year ended ended Currency* 30 June 30 June ended 2006 2005 31 December 2005------------------ ------ ---------- --------- ------- -------- ---------- £m £m +/(-)% +/(-)% £mTurnover(billings) 14,407.1 11,333.6 27.1 23.3 26,673.7================== ====== ========== ========= ======= ======== ========== Revenue 2,864.4 2,467.5 16.1 12.7 5,373.7Direct costs (149.2) (111.1) (34.3) (31.6) (241.0)------------------ ------ ---------- --------- ------- -------- ----------Gross profit 2,715.2 2,356.4 15.2 11.9 5,132.7Operating costs 4 (2,407.3) (2,103.8) (14.4) (11.1) (4,479.9)------------------ ------ ---------- --------- ------- -------- ----------Operating profit 307.9 252.6 21.9 17.9 652.8Share of results of associates 4 25.3 13.7 84.7 77.3 33.9------------------ ------ ---------- --------- ------- -------- ----------Profit beforeinterest andtaxation 333.2 266.3 25.1 20.9 686.7Finance income 5 51.0 36.8 38.6 36.3 87.6Finance costs 5 (97.1) (81.6) (19.0) (17.2) (182.3)------------------ ------ ---------- --------- ------- -------- ----------Profit beforetaxation 287.1 221.5 29.6 24.8 592.0Taxation 7 (91.7) (72.6) (26.3) (23.7) (194.0)------------------ ------ ---------- --------- ------- -------- ----------Profit for theperiod 195.4 148.9 31.2 25.4 398.0------------------ ------ ---------- --------- ------- -------- ---------- Attributable to:Equity holdersof the parent 176.7 135.4 30.5 24.4 363.9Minorityinterests 18.7 13.5 (38.5) (35.4) 34.1------------------ ------ ---------- --------- ------- -------- ---------- 195.4 148.9 31.2 25.4 398.0------------------ ------ ---------- --------- ------- -------- ---------- ------------------ ------ ---------- --------- ------- -------- ---------- Headline PBIT 6,17 361.0 299.6 20.5 16.8 754.8Headline PBITmargin 17 12.6% 12.1% 14.0%Headline PBT 17 316.1 254.8 24.1 19.9 669.0 ------------------ ------ ---------- --------- ------- -------- ---------- Earnings per share**Basic earningsper ordinaryshare 9 14.7p 11.4p 28.9 23.1 30.3pDilutedearnings perordinary share 9 14.3p 11.1p 28.8 22.7 29.7p ------------------ ------ ---------- --------- ------- -------- ---------- * 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 consolidated interim cash flow statement for the six months ended 30 June 2006 --------------------------------- ------ -------- --------- --------- Notes Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005--------------------------------- ------ -------- --------- --------- £m £m £mNet cash (outflow)/inflowfrom operating activities 10 (26.8) (34.0) 837.5Investing activitiesAcquisitions and disposals 10 (124.8) (336.0) (507.7)Purchases of property,plant and equipment (66.6) (68.1) (160.5)Purchases of otherintangible assets (incl.capitalised computer software) (6.9) (2.1) (10.8)Proceeds on disposal ofproperty, plant and equipment 4.8 2.1 6.7--------------------------------- ------ -------- --------- ---------Net cash outflow frominvesting activities (193.5) (404.1) (672.3)Financing activitiesIssue of shares 49.5 15.8 20.3Share repurchases and buybacks 10 (161.5) (75.1) (152.3)Net increase/(decrease)in borrowings 10 273.0 (96.0) (595.2)Financing and share issue costs (0.9) (0.9) (2.2)Equity dividends paid - - (100.2)Dividends paid tominority shareholders insubsidiary undertakings (15.3) (14.3) (24.0)--------------------------------- ------ -------- --------- ---------Net cash inflow/(outflow)from financing activities 144.8 (170.5) (853.6)Net decrease in cash andcash equivalents (75.5) (608.6) (688.4)Translation differences (113.7) 34.5 85.0Cash and cash equivalentsat beginning of period 679.6 1,283.0 1,283.0--------------------------------- ------ -------- --------- ---------Cash and cash equivalentsat end of period 10 490.4 708.9 679.6--------------------------------- ------ -------- --------- ---------Reconciliation of net cash flow tomovement in net debt:Net decrease in cash andcash equivalents (75.5) (608.6) (688.4)Cash (inflow)/outflowfrom (increase)/decreasein debt financing (272.9) 96.5 596.9Net debt acquired - (140.8) (140.8)Other movements 9.9 (32.4) (25.9)Translation difference (76.8) (2.0) 8.9--------------------------------- ------ -------- --------- ---------Movement of net debt inthe period (415.3) (687.3) (249.3)Net debt at beginning of period (804.0) (554.7) (554.7)--------------------------------- ------ -------- --------- ---------Net debt at end of period 11 (1,219.3) (1,242.0) (804.0)--------------------------------- ------ -------- --------- --------- WPP GROUP PLC Unaudited consolidated interim statement of recognised income and expense for the six months ended 30 June 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £m £m £mProfit for the period 195.4 148.9 398.0Exchange adjustments on foreign currencynet (210.9) 141.7 266.1investmentsRevaluation of other investments 2.7 15.8 21.0Actuarial loss on defined benefit pensionschemes - - (16.5)Deferred tax on defined benefit pensionschemes - - 3.6---------------------------- ----------- ----------- -----------Total recognised income and expenserelating to the period (12.8) 306.4 672.2---------------------------- ----------- ----------- -----------Attributable to:Equity holders of the parent (31.5) 292.9 638.1Minority interests 18.7 13.5 34.1---------------------------- ----------- ----------- ----------- (12.8) 306.4 672.2---------------------------- ----------- ----------- ----------- WPP GROUP PLC Unaudited consolidated interim balance sheet as at 30 June 2006 -------------------------- ------ ----------- ----------- ----------- Notes 30 June 30 June 31 December 2006 2005 2005-------------------------- ------ ----------- ----------- ----------- £m £m £mNon-current assetsIntangible assets:Goodwill 12 5,492.7 5,431.3 5,675.2Other 13 1,178.7 1,085.3 1,260.6Property, plant and equipment 410.0 384.6 423.5Interests in associates 443.0 507.0 509.9Other investments 119.7 32.0 55.3Deferred tax assets 111.4 118.4 130.3Trade and other receivables 123.9 134.0 142.1-------------------------- ------ ----------- ----------- ----------- 7,879.4 7,692.6 8,196.9Current assetsInventories 365.3 346.7 281.5Trade and other receivables 4,653.8 4,121.8 4,795.5Cash and short-term deposits 854.8 1,163.0 1,115.2-------------------------- ------ ----------- ----------- ----------- 5,873.9 5,631.5 6,192.2Current liabilitiesTrade and other payables 14 (6,281.7) (5,687.7) (6,828.4)Corporate income tax payable (50.1) (54.1) (56.5)Bank overdrafts and loans (843.6) (873.5) (457.8)-------------------------- ------ ----------- ----------- ----------- (7,175.4) (6,615.3) (7,342.7)-------------------------- ------ ----------- ----------- -----------Net current liabilities (1,301.5) (983.8) (1,150.5)-------------------------- ------ ----------- ----------- -----------Total assets less current liabilities 6,577.9 6,708.8 7,046.4-------------------------- ------ ----------- ----------- ----------- Non-current liabilitiesBonds and bank loans (1,230.5) (1,531.5) (1,461.4)Trade and other payables 15 (690.2) (647.4) (703.0)Deferred tax liabilities (501.4) (452.2) (533.1)Provision for post-employment benefits (231.4) (202.3) (231.4)Provisions for liabilities and charges (114.4) (133.3) (131.7)-------------------------- ------ ----------- ----------- ----------- (2,767.9) (2,966.7) (3,060.6)-------------------------- ------ ----------- ----------- -----------Net assets 3,810.0 3,742.1 3,985.8-------------------------- ------ ----------- ----------- ----------- EquityCalled-up share capital 124.9 126.3 125.3Share premium account 52.6 1,035.3 2.1Shares to be issued 15.7 44.5 37.2Merger reserve (1,374.7) 3,414.6 (1,388.1)Other reserves (39.4) 90.9 167.3Own shares* (289.9) (281.2) (292.9)Retained earnings 5,240.4 (752.5) 5,253.6-------------------------- ------ ----------- ----------- -----------Equity share owners' funds 16 3,729.6 3,677.9 3,904.5Minority interests 80.4 64.2 81.3-------------------------- ------ ----------- ----------- -----------Total Equity 3,810.0 3,742.1 3,985.8-------------------------- ------ ----------- ----------- ----------- * Investments in own shares held by the ESOP Trusts. WPP GROUP PLC 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 145 to 149 of the 2005 Annual Report and Accounts. No changes havebeen made to the Group's accounting policies since this time. Statutory Information and Independent Review The unaudited consolidated interim financial statements for the six months to 30June 2006 and 30 June 2005 do not constitute statutory accounts. The financialinformation for the year ended 31 December 2005 does not constitute statutoryaccounts for the purposes of s240 of the Companies Act 1985. The statutoryaccounts for the year ended 31 December 2005 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 17 August 2006. 3. Currency conversion The 2006 unaudited consolidated interim income statement is prepared using,among other currencies, an average exchange rate of US$1.7908 to the pound(period ended 30 June 2005: US$1.8728; year ended 31 December 2005: US$1.8189).The unaudited consolidated interim balance sheet as at 30 June 2006 has beenprepared using the exchange rate on that day of US$1.8469 to the pound (30 June2005: US$1.7918; 31 December 2005: US$1.7187). 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. 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 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mAmortisation of acquiredintangible assets 23.0 11.8 25.3Goodwill impairment 10.0 20.5 46.0Goodwill write-down relating toutilisation of pre-acquisitiontax losses 3.0 1.0 1.1Gains on disposal of investments (4.2) - (4.3)Share-based incentive plans 37.9 30.3 68.6Other operating costs 2,337.6 2,040.2 4,343.2-------------------------------- ---------- ---------- ---------- 2,407.3 2,103.8 4,479.9-------------------------------- ---------- ---------- ---------- WPP GROUP PLC Notes to the unaudited consolidated interim financial statements (Notes 1 - 17) (continued) 4. Operating costs and share of results of associates (continued) The goodwill impairment charge of £10.0 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 impairment to the carrying value of goodwill.The Directors will reassess the need for any further impairment write-downs atyear end. Charges in respect of share-based incentive plans include: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mShare options 9.2 13.5 25.9Other share-based incentive plans 28.7 16.8 42.7-------------------------------- ---------- ---------- ---------- 37.9 30.3 68.6-------------------------------- ---------- ---------- ---------- Share of results of associates include: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mShare of profit before interest andtaxation 34.4 23.8 54.0Share of exceptional gains 4.0 - -Share of interest and minority interest 0.6 (0.4) (0.9)Share of taxation (13.7) (9.7) (19.2)-------------------------------- ---------- ---------- ---------- 25.3 13.7 33.9-------------------------------- ---------- ---------- ---------- Share of exceptional gains of £4.0 million in the six months ended 30 June 2006represents the Group's share of negative goodwill recognised in the incomestatements of its associate undertakings during the period. 5. Finance income and finance costs Finance income includes: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mExpected return on pension schemeassets 13.0 12.0 24.2Investment income 0.5 - 5.6Interest income 37.5 24.8 57.8-------------------------------- ---------- ---------- ---------- 51.0 36.8 87.6-------------------------------- ---------- ---------- ---------- WPP GROUP PLC Notes to the unaudited consolidated interim financial statements (Notes 1 - 17) (continued) 5. Finance income and finance costs (continued) Finance costs include: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mInterest on pension schemeliabilities 16.5 16.0 32.0Interest payable and similarcharges 79.4 65.6 141.4-------------------------------- ---------- ---------- ----------Finance charges (excludingrevaluation of financialinstruments) 95.9 81.6 173.4Revaluation of financialinstruments 1.2 - 8.9-------------------------------- ---------- ---------- ---------- 97.1 81.6 182.3-------------------------------- ---------- ---------- ---------- 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 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mMovements in fair value oftreasury instruments 2.9 2.1 3.0Revaluations of put options overminority interests (1.7) (2.0) 5.8Other - (0.1) 0.1-------------------------------- ---------- ---------- ---------- 1.2 - 8.9-------------------------------- ---------- ---------- ---------- WPP GROUP PLC 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 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mRevenueAdvertising and Media InvestmentManagement 1,354.4 1,185.9 2,606.4Information, Insight &Consultancy 438.9 387.5 810.4Public Relations & Public Affairs 290.3 251.8 534.4Branding & Identity, Healthcareand Specialist Communications 780.8 642.3 1,422.5-------------------------------- ---------- ---------- ---------- 2,864.4 2,467.5 5,373.7-------------------------------- ---------- ---------- ---------- Headline PBIT*Advertising and Media InvestmentManagement 190.3 158.6 402.7Information, Insight &Consultancy 41.5 36.1 83.4Public Relations & Public Affairs 40.3 35.0 75.3Branding & Identity, Healthcareand Specialist Communications 88.9 69.9 193.4-------------------------------- ---------- ---------- ---------- 361.0 299.6 754.8-------------------------------- ---------- ---------- ---------- Headline PBIT margin % % %Advertising and Media InvestmentManagement 14.1 13.4 15.5Information, Insight &Consultancy 9.5 9.3 10.3Public Relations & Public Affairs 13.9 13.9 14.1Branding & Identity, Healthcareand Specialist Communications 11.4 10.9 13.6-------------------------------- ---------- ---------- ---------- 12.6 12.1 14.0-------------------------------- ---------- ---------- ---------- * Headline PBIT is defined in note 17. WPP GROUP PLC 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 2006 2005 2005 -------------------------------- ---------- ---------- ---------- £m £m £mRevenueUnited Kingdom 415.1 389.0 808.1North America 1,135.5 973.4 2,106.9Continental Europe 741.4 662.3 1,410.3Asia Pacific, Latin America,Africa & Middle East 572.4 442.8 1,048.4-------------------------------- ---------- ---------- ---------- 2,864.4 2,467.5 5,373.7-------------------------------- ---------- ---------- ---------- Headline PBIT*United Kingdom 36.7 31.3 84.6North America 176.1 151.9 350.1Continental Europe 85.8 68.9 176.1Asia Pacific, Latin America,Africa & Middle East 62.4 47.5 144.0-------------------------------- ---------- ---------- ---------- 361.0 299.6 754.8-------------------------------- ---------- ---------- ---------- Headline PBIT margin % % %United Kingdom 8.8 8.0 10.5North America 15.5 15.6 16.6Continental Europe 11.6 10.4 12.5Asia Pacific, Latin America,Africa & Middle East 10.9 10.7 13.7-------------------------------- ---------- ---------- ---------- 12.6 12.1 14.0-------------------------------- ---------- ---------- ---------- * Headline PBIT is defined in note 17. WPP GROUP PLC Notes to the unaudited consolidated interim financial statements (Notes 1 - 17) (continued) 7. Taxation The Group tax rate on Headline PBT* is 29.0% (30 June 2005: 28.5% and 31December 2005: 29.0%). The Group tax rate on Reported PBT is 31.9% (30 June 2005: 32.8% and 31 December2005: 32.8%). The tax charge comprises: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 -------------------------------- ---------- ---------- ---------- £m £m £mCurrent taxUK Corporation tax at 30% 11.9 8.3 8.5Foreign tax 80.9 66.4 187.2-------------------------------- ---------- ---------- ----------Total Current Tax 92.8 74.7 195.7Deferred taxCurrent year (1.1) (2.1) (1.7)-------------------------------- ---------- ---------- ----------Tax expense 91.7 72.6 194.0-------------------------------- ---------- ---------- ---------- * Headline PBT is defined in note 17. 8. Ordinary dividends The Board has recommended an interim dividend of 3.60p (2005: 3.00p) perordinary share. This is expected to be paid on 13 November 2006 to share ownerson the register at 13 October 2006. The Board recommended a final dividend of 6.34p per ordinary share in respect of2005. This was approved by the company's shareholders at the Annual GeneralMeeting on 27 June 2006 and paid on 3 July 2006. 9. Earnings per share Basic EPS The calculation of basic Reported and Headline EPS is as follows: ------------------------ -------- --------- ------ ------- ---------- Six months Six months +/(-)% Constant Year ended ended Currency ended 30 June 30 June +/(-)% 31 December 2006 2005 2005------------------------ -------- --------- ------ ------- ---------- Reported earnings* (£m) 176.7 135.4 363.9Headline earnings (£m)(note 17) 205.7 168.7 440.9------------------------ -------- --------- ------ ------- ----------Average shares used in Basic EPS calculation(m) 1,205.2 1,192.7 1,200.1------------------------ -------- --------- ------ ------- ----------Reported EPS 14.7p 11.4p 28.9 23.1 30.3pHeadline EPS 17.1p 14.1p 21.3 16.1 36.7p----------------------- --------- --------- ------ ------- ---------- * Reported earnings is equivalent to profit for the period attributable toequity holders of the parent. WPP GROUP PLC 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 +/(-)% Constant Year ended ended Currency ended 30 June 30 June +/(-)% 31 December 2006 2005 2005 ----------------------- --------- --------- ------- ------- ----------Diluted reportedearnings (£m) 177.8 135.4 363.9Diluted headlineearnings (£m) 206.8 168.7 440.9----------------------- --------- --------- ------- ------- ----------Shares used indiluted EPScalculation (m) 1,243.5 1,218.6 1,224.8----------------------- --------- --------- ------- ------- ----------Diluted reported EPS 14.3p 11.1p 28.8 22.7 29.7pDiluted headline EPS 16.6p 13.8p 20.3 15.6 36.0p----------------------- --------- --------- ------- ------- ---------- Diluted EPS has been calculated based on the Reported and Headline Earningsamounts above. For the six months ended 30 June 2006 the $150 million Greyconvertible was dilutive and earnings were consequently increased by £1.1million. For the six months ended 30 June 2005, and the year ended 31 December2005, the Grey convertible was accretive to earnings and therefore excluded fromthe calculation of dilutive earnings. For the six months ended 30 June 2006 and30 June 2005, and the year ended 31 December 2005, the £450 million convertiblebonds were accretive to earnings and therefore excluded from the calculation ofdilutive earnings. 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 2006 2005 2005------------------------------- ---------- ---------- ---------- m m mAverage shares used in Basic EPScalculation 1,205.2 1,192.7 1,200.1Dilutive share optionsoutstanding 18.0 19.3 18.6Other potentially issuable shares 11.4 6.6 6.1$150 million Grey convertiblebonds 8.9 - -------------------------------- ---------- ---------- ----------Shares used in Diluted EPScalculation 1,243.5 1,218.6 1,224.8------------------------------- ---------- ---------- ---------- At 30 June 2006 there were 1,249,246,636 ordinary shares in issue. WPP GROUP PLC 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 11: Net cash (outflow)/inflow from operating activities: ----------------------------------- --------- --------- --------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005----------------------------------- --------- --------- --------- £m £m £mOperating profit 307.9 252.6 652.8Adjustments for:Non-cash share-based incentive plans(including share options) 37.9 30.3 68.6Depreciation of property, plant andequipment 60.8 46.0 111.4Impairment of goodwill 10.0 20.5 46.0Goodwill write-down relating toutilisation of pre-acquisition taxlosses 3.0 1.0 1.1Amortisation of acquired intangibleassets 23.0 11.8 25.3Amortisation of other intangible assets 6.1 5.0 10.7Gains on disposal of investments (4.2) - (4.3)(Gains)/losses on sale of property,plant and equipment (0.2) - 1.1----------------------------------- --------- --------- ---------Operating cash flow before movements inworking capital and provisions 444.3 367.2 912.7Movements in working capital andprovisions (375.4) (317.9) 107.6----------------------------------- --------- --------- ---------Cash generated by operations 68.9 49.3 1,020.3Corporation and overseas tax paid (69.3) (57.3) (136.0)Interest and similar charges paid (76.9) (63.0) (128.2)Interest received 39.5 27.5 62.4Investment income - - 5.6Dividends from associates 11.0 9.5 13.4----------------------------------- --------- --------- --------- (26.8) (34.0) 837.5----------------------------------- --------- --------- --------- Acquisitions and disposals: ----------------------------------- --------- --------- --------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 ----------------------------------- --------- --------- --------- £m £m £mInitial cash consideration (50.0) (468.9) (561.2)Cash and cash equivalentsacquired (net) 15.6 176.1 173.9Earnout payments (81.0) (69.3) (96.7)Loan note redemptions (11.5) (3.2) (33.0)Purchase of other investments(including associates) (11.6) (8.2) (29.0)Proceeds on disposal ofinvestments 13.7 37.5 38.3----------------------------------- --------- --------- --------- (124.8) (336.0) (507.7)----------------------------------- --------- --------- --------- WPP GROUP PLC 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 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mShare cancellations (includingbrokerage fees) (123.1) (58.9) (123.3)Purchase of own shares by ESOPTrusts (38.4) (16.2) (29.0)-------------------------------- ---------- ---------- ---------- (161.5) (75.1) (152.3)-------------------------------- ---------- ---------- ---------- Net increase/(decrease) in borrowings: -------------------------------- ---------- --------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mIncrease in drawings on bankloans 273.0 123.8 17.1Repayment of $287.5 millionconvertible bonds - (154.5) (154.5)Repayment of $125 million Greydebt - (65.3) (65.3)Repayment of working capitalfacility - - (277.2)Repayment of $200 million bonds - - (115.3)-------------------------------- ---------- --------- ---------- 273.0 (96.0) (595.2)-------------------------------- ---------- --------- ---------- Cash and cash equivalents: -------------------------------- ---------- ---------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mCash at bank and in hand 741.2 1,088.7 1,029.0Short-term bank deposits 113.6 74.3 86.2Overdrafts* (364.4) (454.1) (435.6)-------------------------------- ---------- ---------- ---------- 490.4 708.9 679.6-------------------------------- ---------- ---------- ---------- * 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 2006 2005 2005-------------------------------- ---------- ---------- ---------- £m £m £mCash and short-term deposits 854.8 1,163.0 1,115.2Bank loans and overdrafts due withinone year (843.6) (594.5) (457.8)Corporate bond and loans due after oneyear (1,230.5) (1,531.5) (1,461.4)Working capital facility - (279.0) --------------------------------- ---------- ---------- ---------- (1,219.3) (1,242.0) (804.0)-------------------------------- ---------- ---------- ---------- WPP GROUP PLC Notes to the unaudited consolidated interim financial statements (Notes 1 - 17) (continued) 12. Goodwill and acquisitions Goodwill in relation to subsidiary undertakings decreased by £182.5 million inthe period. This includes both goodwill arising on acquisitions completed in theperiod and adjustments to goodwill relating to acquisitions completed in prioryears, net of impairment charges and the effect of currency translation.Goodwill in relation to associate undertakings decreased by £54.0 million in theperiod. Future anticipated payments to vendors in respect of both deferred and earnoutobligations totalled £167.7 million (period ended 30 June 2005: £233.1 million;year ended 31 December 2005: £220.0 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. In aggregate, for the six months ended 30 June 2006, acquisitions completedduring the period contributed £22.0 million to revenue, £2.8 million tooperating profit and £3.5 million to Headline PBIT. 13. Other intangible assets The following are included in other intangibles: -------------------------------- ---------- --------- ---------- 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mBrands with an indefinite useful life 853.0 794.0 897.0Acquired intangibles 296.8 260.2 330.3Other (including capitalised computersoftware) 28.9 31.1 33.3-------------------------------- ---------- --------- ---------- 1,178.7 1,085.3 1,260.6-------------------------------- ---------- --------- ---------- 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 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mTrade payables 4,250.2 3,713.4 4,659.3Deferred income 584.0 570.9 604.2Payments due to vendors 46.0 87.1 81.3Loan notes due to vendors 2.1 34.1 13.6Liabilities in respect of put optionagreements with vendors 50.2 23.5 50.4Dividends payable 76.1 62.6 -Other creditors and accruals 1,273.1 1,196.1 1,419.6-------------------------------- ---------- --------- ---------- 6,281.7 5,687.7 6,828.4-------------------------------- ---------- --------- ---------- WPP GROUP PLC 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 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mCorporate income and other taxespayable 378.7 320.3 372.8Payments due to vendors 121.7 146.0 138.7Liabilities in respect of put optionagreements with vendors 40.4 32.6 39.6Other creditors and accruals 149.4 148.5 151.9-------------------------------- ---------- --------- ---------- 690.2 647.4 703.0-------------------------------- ---------- --------- ---------- 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 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mWithin one year 46.0 87.1 81.3Between 1 and 2 years 43.8 68.5 71.9Between 2 and 3 years 26.4 36.9 14.7Between 3 and 4 years 27.9 14.9 20.3Between 4 and 5 years 18.8 18.9 31.8Over 5 years 4.8 6.8 --------------------------------- ---------- --------- ---------- 167.7 233.1 220.0-------------------------------- ---------- --------- ---------- The Group does not consider there to be any material contingent liabilities asat 30 June 2006. WPP GROUP PLC 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 2006 2005 2005-------------------------------- --------- ---------- ---------- £m £m £mProfit for the periodattributable to equity shareowners 176.7 135.4 363.9Ordinary dividends (76.1) (62.6) (100.2)-------------------------------- --------- ---------- ---------- 100.6 72.8 263.7 Ordinary shares issued in respectof acquisitions - 506.4 506.4Other ordinary shares issued 48.4 15.4 18.3Share cancellations (123.1) (58.9) (123.3)Share issue/cancellation costs (0.7) (3.6) (3.6)Net additions of own shares byESOP Trusts (38.4) (16.2) (29.0)Transfer to goodwill - - (5.1)Non-cash share-based incentiveplans (including share options) 37.9 30.3 68.6Tax benefit of share-basedpayments 10.1 3.5 12.9Actuarial loss on defined benefitschemes - - (16.5)Deferred tax on defined benefitpension schemes - - 3.6Exchange adjustments on foreigncurrency net investments (210.9) 141.7 266.1Other movements 0.8 - -Revaluation of other investments 2.7 15.8 21.0Recognition of financialinstruments during the period (2.3) 21.7 (27.6)-------------------------------- --------- ---------- ----------Net (deductions)/additions toequity share owners' funds (174.9) 728.9 955.5Opening equity share owners'funds 3,904.5 2,949.0 2,949.0-------------------------------- --------- ---------- ----------Closing equity share owners'funds 3,729.6 3,677.9 3,904.5-------------------------------- --------- ---------- ---------- WPP GROUP PLC 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 2006 -------------------------------- ---------- --------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005-------------------------------- ---------- --------- ---------- £m £m £mProfit before interest andtaxation 333.2 266.3 686.7Amortisation of acquiredintangible assets 23.0 11.8 25.3Goodwill impairment 10.0 20.5 46.0Goodwill write-down relating toutilisation of pre-acquisitiontax losses 3.0 1.0 1.1Gains on disposal of investments (4.2) - (4.3)Share of exceptional gains ofassociates (4.0) - --------------------------------- ---------- --------- ----------Headline PBIT 361.0 299.6 754.8-------------------------------- ---------- --------- ---------- Finance income 51.0 36.8 87.6Finance charges (excludingrevaluation of financialinstruments) (95.9) (81.6) (173.4)-------------------------------- ---------- --------- ---------- (44.9) (44.8) (85.8)-------------------------------- ---------- --------- ----------Interest cover on Headline PBIT 8.0 times 6.7 times 8.8 times-------------------------------- ---------- --------- ---------- Calculation of Headline EBITDA -------------------------------- ---------- --------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 -------------------------------- ---------- --------- ---------- £m £m £mHeadline PBIT (as above) 361.0 299.6 754.8Depreciation of property, plantand equipment 60.8 46.0 111.4Amortisation of other intangibleassets 6.1 5.0 10.7-------------------------------- ---------- --------- ----------Headline EBITDA 427.9 350.6 876.9-------------------------------- ---------- --------- ---------- WPP GROUP PLC 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 2006 ------------------------------- --------- ---------- ----------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005------------------------------- --------- ---------- ----------- £m £m £m Profit before taxation 287.1 221.5 592.0 Amortisation of acquiredintangibles 23.0 11.8 25.3Goodwill impairment 10.0 20.5 46.0Goodwill write-down relating toutilisation of pre-acquisitiontax losses 3.0 1.0 1.1Gains on disposal of investments (4.2) - (4.3)Share of exceptional gains ofassociates (4.0) - -Revaluation of financialinstruments 1.2 - 8.9------------------------------- --------- ---------- -----------Headline PBT 316.1 254.8 669.0 Taxation (91.7) (72.6) (194.0)Minority interests (18.7) (13.5) (34.1)------------------------------- --------- ---------- -----------Headline earnings 205.7 168.7 440.9------------------------------- --------- ---------- ----------- Ordinary dividends 76.1 62.6 100.2------------------------------- --------- ---------- -----------Dividend cover on Headline earnings 2.7 times 2.7 times 4.4 times------------------------------- --------- ---------- ----------- Headline PBIT margins before and after share of results of associates --------------------------- -------- --------- --------- --------- Margin (%) Six months Margin (%) Six months ended ended 30 June 30 June 2006 2005 --------------------------- -------- --------- --------- --------- £m £m Revenue 2,864.4 2,467.5Headline PBIT 12.6% 361.0 12.1% 299.6--------------------------- -------- --------- --------- ---------Share of results ofassociates (excludingexceptional gains) 21.3 13.7--------------------------- -------- --------- --------- ---------Headline PBIT excluding share of results ofassociates 11.9% 339.7 11.6% 285.9--------------------------- -------- --------- --------- --------- WPP GROUP PLC 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 2006 ---------------------------------- --------- --------- ---------- Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005---------------------------------- --------- --------- ---------- £m £m £mCash generated by operations 68.9 49.3 1,020.3Plus:Interest received 39.5 27.5 62.4Investment income - - 5.6Dividends received fromassociates 11.0 9.5 13.4Issue of shares 49.5 15.8 20.3Proceeds on disposal of property,plant and equipment 4.8 2.1 6.7Gains on disposal of investments 4.2 - 4.3Gains/(losses) on sale ofproperty, plant and equipment 0.2 - (1.1)Movements in working capital andprovisions 375.4 317.9 (107.6)Less:Interest and similar charges (76.9) (63.0) (128.2)Purchases of property, plant andequipment (66.6) (68.1) (160.5)Purchases of other intangibleassets (including capitalisedcomputer software) (6.9) (2.1) (10.8)Corporation and overseas tax paid (69.3) (57.3) (136.0)Dividends paid to minorityshareholders in subsidiaryundertakings (15.3) (14.3) (24.0)---------------------------------- --------- --------- ----------Free Cash Flow 318.5 217.3 564.8---------------------------------- --------- --------- ---------- 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 2006 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated cash flow statement 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 and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly,we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPLondonChartered Accountants 17 August 2006 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. Constant currency The Group uses US dollar-based, constant currency models to measure performance.These are calculated by applying budgeted 2006 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. Estimated net new billings Net new billings represent the estimated annualised impact on billings(turnover) of new business gained from both existing and new clients, net ofexisting client business lost. The estimated impact is based upon initialassessments of the clients' media budgets, which may not necessarily result inactual billings of the same amount. Free cash flow Free cash flow is calculated as Headline operating profit before depreciation ofproperty, plant and equipment and amortisation of other intangible assets,including dividends received from associates, interest received, investmentincome received, proceeds from the issue of shares, and proceeds from thedisposal of property, plant and equipment, less corporation and overseas taxpaid, interest and similar charges paid, dividends paid to minority shareholdersin subsidiary undertakings, purchases of property, plant and equipment andpurchases of other intangible assets. Headline earnings Headline PBT less taxation and minority interests. Headline operating profit / Headline PBIT Profit before finance income/costs, taxation, investment gains, goodwillimpairment and other goodwill write-downs, amortisation of acquired intangibleassets, and share of exceptional gains of associates. Headline PBT Profit before taxation, investment gains, goodwill impairment and other goodwillwrite-downs, amortisation of acquired intangible assets, share of exceptionalgains of associates and gains/losses arising from the revaluation of financialinstruments. 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:
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