23rd Feb 2007 07:02
WPP Group PLC23 February 2007 WPP GROUP PLC Preliminary results for the year ended 31 December 2006 Unaudited preliminary consolidated income statement for the year ended 31 December 2006 Constant Currency1 Notes 2006 2005 £m £m +/(-)% +/(-)%Billings 30,140.7 26,673.7 13.0 13.9 Revenue 5,907.8 5,373.7 9.9 10.9Direct costs (296.8) (241.0) (23.2) (24.4)Gross profit 5,611.0 5,132.7 9.3 10.3Operating costs 4 (4,869.4) (4,479.9) (8.7) (9.5)Operating profit 741.6 652.8 13.6 15.5Share of results of associates 4 41.1 33.9 21.2 24.6Profit before interest and taxation 782.7 686.7 14.0 15.9Finance income 5 111.0 87.6 26.7 28.3Finance costs 5 (211.7) (182.3) (16.1) (16.4)Profit before taxation 682.0 592.0 15.2 17.6Taxation 7 (199.4) (194.0) (2.8) (4.6)Profit for the year 482.6 398.0 21.3 23.9 Attributable to:Equity holders of the parent 435.8 363.9 19.8 22.4Minority interests 46.8 34.1 (37.2) (39.8) 482.6 398.0 21.3 23.9 Headline PBIT 6,18 859.0 754.8 13.8 15.7Headline PBIT margin 18 14.5% 14.0%Headline PBT 18 766.3 669.0 14.5 16.8 Earnings per share2Basic earnings per ordinary share 9 36.3 30.3p 19.8 22.3Diluted earnings per ordinary share 9 35.2 29.7p 18.5 21.0 1 The basis for calculating the constant currency percentage change shown aboveis described in the glossary attached to this appendix. 2 The calculations of the Group's earnings per share and Headline earnings pershare are set out in note 9. WPP GROUP PLC Unaudited preliminary consolidated cash flow statement for the year ended 31 December 2006 Notes 2006 2005 £m £mNet cash inflow from operating activities 10 661.4 837.5Investing activitiesAcquisitions and disposals 10 (215.6) (507.7)Purchase of property, plant and equipment (167.8) (160.5)Purchase of other intangible assets (incl. capitalised computer (16.7) (10.8)software)Proceeds on disposal of property, plant and equipment 22.4 6.7Net cash outflow from investing activities (377.7) (672.3)Financing activitiesIssue of shares 70.9 20.3Share repurchases and buybacks 10 (257.7) (152.3)Net increase/(decrease) in borrowings 10 382.1 (595.2)Financing and share issue costs (3.7) (2.2)Equity dividends paid (118.9) (100.2)Dividends paid to minority shareholders in subsidiary undertakings (28.8) (24.0)Net cash inflow/(outflow) from financing activities 43.9 (853.6)Net increase/(decrease) in cash and cash equivalents 327.6 (688.4)Translation differences (50.3) 85.0Cash and cash equivalents at beginning of year 679.6 1,283.0Cash and cash equivalents at end of year 10 956.9 679.6Reconciliation of net cash flow to movement in net debt:Net (decrease)/increase in cash and cash equivalents 327.6 (688.4)Cash (outflow)/inflow from decrease/(increase) in debt financing (380.1) 596.9Net debt acquired - (140.8)Other movements 9.3 (25.9)Translation difference 32.6 8.9Movement of net debt in the year (10.6) (249.3)Net debt at beginning of year (804.0) (554.7)Net debt at end of year 11 (814.6) (804.0) WPP GROUP PLC Unaudited preliminary consolidated statement of recognised income and expense for the year ended 31 December 2006 2006 2005 £m £mProfit for the year 482.6 398.0Exchange adjustments on foreign currency net investments (367.0) 266.1Revaluation of other investments 9.5 21.0Actuarial gain/(loss) on defined benefit pension schemes 26.0 (16.5)Deferred tax on defined benefit pension schemes 5.3 3.6Total recognised income and expense relating to the year 156.4 672.2 Attributable to:Equity holders of the parent 109.6 638.1Minority interests 46.8 34.1 156.4 672.2 WPP GROUP PLC Unaudited preliminary consolidated balance sheet as at 31 December 2006 Notes 2006 2005 £m £mNon-current assetsIntangible assets: Goodwill 12 5,434.5 5,675.2 Other 13 1,115.4 1,260.6Property, plant and equipment 415.3 423.5Interests in associates 411.4 509.9Other investments 136.5 55.3Deferred tax assets 108.9 130.3Trade and other receivables 14 110.3 142.1 7,732.3 8,196.9Current assetsStocks and work in progress 341.5 281.5Corporate income tax recoverable 26.5 21.0Trade and other receivables 14 4,931.9 4,774.5Cash and short-term deposits 1,663.7 1,115.2 6,963.6 6,192.2Current liabilitiesTrade and other payables 15 (6,783.8) (6,828.4)Corporate income tax payable (39.6) (56.5)Bank overdrafts and loans (1,260.6) (457.8) (8,084.0) (7,342.7)Net current liabilities (1,120.4) (1,150.5)Total assets less current liabilities 6,611.9 7,046.4 Non-current liabilitiesBonds and bank loans (1,217.7) (1,461.4)Trade and other payables 16 (331.9) (330.2)Corporate income tax payable (383.7) (372.8)Deferred tax liabilities (467.8) (533.1)Provisions for post-employment benefits (187.6) (231.4)Provisions for liabilities and charges (104.8) (131.7) (2,693.5) (3,060.6)Net assets 3,918.4 3,985.8 EquityCalled-up share capital 124.1 125.3Share premium account 74.9 2.1Shares to be issued 7.5 37.2Merger reserve (1,370.0) (1,388.1)Other reserves (170.1) 167.3Own shares1 (288.5) (292.9)Retained earnings 5,449.0 5,253.6Equity share owners' funds 17 3,826.9 3,904.5Minority interests 91.5 81.3Total equity 3,918.4 3,985.8 1 Investments in own shares held by the ESOP Trusts. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements 1. Basis of accounting The unaudited preliminary consolidated financial statements are prepared underthe historical cost convention, except for the revaluation of certain financialinstruments as disclosed in our accounting policies. 2. Accounting policies The unaudited preliminary consolidated financial statements comply with therecognition and measurement criteria of International Financial ReportingStandards (IFRS), and with the accounting policies of the Group which were setout on pages 145 to 149 of the 2005 Annual Report and Accounts. No changes havebeen made to the Group's accounting policies since this time. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The Company's 2006 Annual Report andAccounts will be prepared in compliance with IFRS. Statutory Information The financial information for the years ended 31 December 2006 and 2005 does notconstitute statutory accounts for the purposes of s240 of the Companies Act1985. The statutory accounts for the year ended 31 December 2005 have beendelivered to the Registrar of Companies and received an unqualified auditors'report and did not contain a statement under s237 (2) or (3) of the CompaniesAct 1985. The statutory accounts for the year ended 31 December 2006 will befinalised on the basis of the financial information presented by the directorsin this unaudited preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. Theaudit report for the year ended 31 December 2006 has yet to be signed. The announcement of the preliminary results was approved by the board ofdirectors on 22 February 2007. 3. Currency conversion The 2006 unaudited preliminary consolidated income statement is prepared using,among other currencies, an average exchange rate of US$1.8432 to the pound(2005: US$1.8189). The unaudited preliminary consolidated balance sheet as at 31December 2006 has been prepared using the exchange rate on that day of US$1.9569to the pound (2005: US$1.7187). The basis for calculating the constant currency percentage changes, shown on theface of the unaudited preliminary consolidated income statement, is described inthe glossary attached to this appendix. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 4. Operating costs and share of results of associates Operating costs include: 2006 2005 £m £mAmortisation and impairment of acquired intangible assets 43.3 25.3Goodwill impairment 35.5 46.0Goodwill write-down relating to utilisation of pre-acquisition tax losses 8.8 1.1Gains on disposal of investments (7.3) (4.3)Share-based incentive plans 70.9 68.6Other operating costs 4,718.2 4,343.2 4,869.4 4,479.9 The goodwill impairment charge of £35.5 million (2005: £46.0 million) relates toa number of under-performing businesses in the Group. In certain markets, theimpact of current, local economic conditions and trading circumstances on thesebusinesses is sufficiently severe to indicate impairment to the carrying valueof goodwill. Operating profit includes credits totalling £10.6 million (2005: £10.1 million)relating to the release of excess provisions and other balances established inrespect of acquisitions completed prior to 2005. Share of results of associates include: 2006 2005 £m £mShare of profit before interest and taxation 61.4 54.0Share of exceptional gains 4.0 -Share of interest and minority interest 0.9 (0.9)Share of taxation (25.2) (19.2) 41.1 33.9 Share of exceptional gains of £4.0 million in the year ended 31 December 2006represents the Group's share of negative goodwill recognised in the incomestatements of its associate undertakings during the year. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 5. Finance income and finance costs Finance income includes: 2006 2005 £m £mExpected return on pension scheme assets 25.2 24.2Investment income 5.7 5.6Interest income 80.1 57.8 111.0 87.6 Finance costs include: 2006 2005 £m £mInterest on pension scheme liabilities 32.4 32.0Interest payable and similar charges 171.3 141.4Finance charges (excluding revaluation of financial instruments) 203.7 173.4Revaluation of financial instruments 8.0 8.9 211.7 182.3 The following are included in the revaluation of financial instruments shownabove: 2006 2005 £m £mMovements in fair value of treasury instruments 3.3 3.0Revaluation of put options over minority interests 4.7 5.8Other - 0.1 8.0 8.9 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 6. Segmental analysis Reported contributions by operating sector were as follows: 2006 2005 £m £mRevenueAdvertising and Media Investment Management 2,806.9 2,606.4Information, Insight & Consultancy 892.9 810.4Public Relations & Public Affairs 595.7 534.4Branding & Identity, Healthcare and Specialist Communications 1,612.3 1,422.5 5,907.8 5,373.7 Headline PBIT1Advertising and Media Investment Management 443.7 402.7Information, Insight & Consultancy 98.7 83.4Public Relations & Public Affairs 89.5 75.3Branding & Identity, Healthcare and Specialist Communications 227.1 193.4 859.0 754.8 Headline PBIT Margin % %Advertising and Media Investment Management 15.8 15.5Information, Insight & Consultancy 11.1 10.3Public Relations & Public Affairs 15.0 14.1Branding & Identity, Healthcare and Specialist Communications 14.1 13.6 14.5 14.0 1 Headline PBIT is defined in note 18. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 6. Segmental analysis (continued) Reported contributions by geographical area were as follows: 2006 2005 £m £mRevenueUnited Kingdom 856.3 808.1North America 2,291.1 2,106.9Continental Europe 1,532.9 1,410.3Asia Pacific, Latin America, Africa & Middle East 1,227.5 1,048.4 5,907.8 5,373.7 Headline PBIT1United Kingdom 97.9 84.6North America 389.0 350.1Continental Europe 194.3 176.1Asia Pacific, Latin America, Africa & Middle East 177.8 144.0 859.0 754.8 Headline PBIT Margin % %United Kingdom 11.4 10.5North America 17.0 16.6Continental Europe 12.7 12.5Asia Pacific, Latin America, Africa & Middle East 14.5 13.7 14.5 14.0 1 Headline PBIT is defined in note 18. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 7. Taxation The Group tax rate on Headline PBT1 is 26.0% (2005: 29.0%). The Group tax rateon Reported PBT is 29.2% (2005: 32.8%). The tax charge comprises: 2006 2005 £m £mCurrent taxUK Corporation tax at 30%Current year 36.6 32.9Prior years (44.9) (24.4) (8.3) 8.5Foreign taxCurrent year 216.9 177.3Prior years (7.6) 9.9 209.3 187.2Total Current tax 201.0 195.7Deferred taxCurrent year (1.6) (1.7)Tax expense 199.4 194.0 1 Headline PBT is defined in note 18. 8. Ordinary dividends The Board has recommended a final dividend of 7.61p (2005: 6.34p) per ordinaryshare in addition to the interim dividend paid of 3.60p (2005: 3.00p) perordinary share. This makes a total for the year of 11.21p (2005: 9.34p) perordinary share, an increase of 20%. The final dividend is expected to be paid on9 July 2007 to share owners on the register at 8 June 2007. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 9. Earnings per share Basic EPS The calculation of basic Reported and Headline EPS is as follows: 2006 2005 +/(-)% Constant Currency +/(-)%Reported earnings1 (£m) 435.8 363.9Headline earnings (£m) (note 18) 520.1 440.9Average shares used in Basic EPS calculation (m) 1,201.0 1,200.1Reported EPS 36.3p 30.3p 19.8 22.3Headline EPS 43.3p 36.7p 18.0 20.2 1 Reported earnings is equivalent to profit for the year attributable to equityholders of the parent. Diluted EPS The calculation of diluted Reported and Headline EPS is set out below: 2006 2005 +/(-)% Constant Currency +/(-)%Diluted Reported earnings (£m) 436.9 363.9Diluted Headline earnings (£m) 521.2 440.9Shares used in diluted EPS calculation (m) 1,242.2 1,224.8Diluted Reported EPS 35.2p 29.7p 18.5 21.0Diluted Headline EPS 42.0p 36.0p 16.7 18.9 Diluted EPS has been calculated based on the Reported and Headline Earningsamounts above. For the year ended 31 December 2006, the $150 million Greyconvertible bonds were dilutive to earnings whilst the £450 million convertiblebonds were accretive. Earnings for the purposes of this calculation consequentlyincluded an additional £1.1 million in 2006. In 2005, both convertibles wereaccretive to earnings and therefore excluded from the calculation of dilutiveearnings. A reconciliation between the shares used in calculating Basic and Diluted EPS isas follows: 2006 2005 m mAverage shares used in Basic EPS calculation 1,201.0 1,200.1Dilutive share options outstanding 14.9 18.6Other potentially issuable shares 17.4 6.1$150 million Grey convertible bonds 8.9 -Shares used in Diluted EPS calculation 1,242.2 1,224.8 At 31 December 2006 there were 1,240,605,187 (2005: 1,252,899,372) ordinaryshares in issue. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 10. Analysis of cash flows The following tables analyse the items included within the main cash flowheadings on page 13: Net cash inflow from operating activities: 2006 2005 £m £mProfit for the year 482.6 398.0Taxation 199.4 194.0Finance costs 211.7 182.3Finance income (111.0) (87.6)Share of results of associates (41.1) (33.9)Operating profit 741.6 652.8Adjustments for:Non cash share-based incentive plans (including share options) 70.9 68.6Depreciation of property, plant and equipment 129.1 111.4Goodwill impairment 35.5 46.0Goodwill write-down relating to utilisation of pre-acquisition tax losses 8.8 1.1Amortisation and impairment of acquired intangible assets 43.3 25.3Amortisation of other intangible assets 13.5 10.7Gains on disposal of investments (7.3) (4.3)(Gains)/losses on sale of property, plant and equipment (3.7) 1.1Operating cash flow before movements in working capital and provisions 1,031.7 912.7Movements in working capital and provisions (171.1) 107.6Cash generated by operations 860.6 1,020.3Corporation and overseas tax paid (162.0) (136.0)Interest and similar charges paid (135.1) (128.2)Interest received 75.2 62.4Investment income 2.4 5.6Dividends from associates 20.3 13.4 661.4 837.5 Acquisitions and disposals: 2006 2005 £m £mInitial cash consideration (120.5) (561.2)Cash and cash equivalents acquired (net) 21.4 173.9Earnout payments (91.6) (96.7)Loan note redemptions (11.7) (33.0)Purchase of other investments (including associates) (28.7) (29.0)Proceeds on disposal of investments 15.5 38.3 (215.6) (507.7) WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 10. Analysis of cash flows (continued) Share repurchases and buybacks: 2006 2005 £m £mShare cancellations (excluding brokerage fees) (218.8) (123.3)Purchase of own shares by ESOP trusts (38.9) (29.0) (257.7) (152.3) Net increase/(decrease) in borrowings: 2006 2005 £m £m(Decrease)/increase in drawings on bank loans (21.8) 17.1Proceeds from issue of €600 million Eurobonds 403.9 -Repayment of $287.5 million convertible bonds - (154.5)Repayment of $125 million Grey debt - (65.3)Repayment of working capital facility - (277.2)Repayment of $200 million bonds - (115.3) 382.1 (595.2) Cash and cash equivalents: 2006 2005 £m £mCash at bank and in hand 1,476.8 1,029.0Short-term bank deposits 186.9 86.2Overdrafts1 (706.8) (435.6) 956.9 679.6 1 Bank overdrafts are included in cash and cash equivalents because they form anintegral part of the Group's cash management. 11. Net debt 2006 2005 £m £mCash and short-term deposits 1,663.7 1,115.2Bank loans and overdrafts due within one year (1,260.6) (457.8)Corporate bond and loans due after one year (1,217.7) (1,461.4)Net debt (814.6) (804.0) WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 12. Goodwill and acquisitions Goodwill in relation to subsidiary undertakings decreased by £240.7 million(2005: increased by £1,285.5 million) in the year. This includes both goodwillarising on acquisitions completed in the year and adjustments to goodwillrelating to acquisitions completed in prior years, net of impairment charges andthe effect of currency translation. Goodwill in relation to associateundertakings decreased by £76.0 million (2005: increased by £79.1 million) inthe year. Future anticipated payments to vendors in respect of both deferred and earnoutobligations totalled £235.5 million (2005: £220.0 million). Earnouts are basedon the directors' best estimates of future obligations, which are dependent onthe future performance of the interests acquired and assume the operatingcompanies improve profits in line with directors' estimates. The contribution to revenue and operating profit of acquisitions completed in2006 was not material. 13. Other intangible assets The following are included in other intangibles: 2006 2005 £m £m Brands with an indefinite useful life 811.4 897.0Acquired intangibles 271.9 330.3Other (including capitalised computer software) 32.1 33.3 1,115.4 1,260.6 14. Trade and other receivables Amounts falling due within one year: 2006 2005 £m £m Trade receivables 4,021.4 3,999.3VAT and sales taxes recoverable 50.0 43.0Other debtors 438.4 350.8Prepayments and accrued income 422.1 381.4 4,931.9 4,774.5 Amounts falling due after more than one year: 2006 2005 £m £m Other debtors 106.6 115.8Prepayments and accrued income 3.7 26.3 110.3 142.1 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 15. Trade and other payables: amounts falling due within one year The following are included in trade and other payables falling due within oneyear: 2006 2005 £m £m Trade payables 4,743.6 4,659.3Deferred income 510.8 604.2Payments due to vendors 87.9 81.3Loan notes due to vendors 1.8 13.6Liabilities in respect of put option agreements with vendors 51.1 50.4Other creditors and accruals 1,388.6 1,419.6 6,783.8 6,828.4 16. Trade and other payables: amounts falling due after more than one year The following are included in trade and other payables falling due after morethan one year: 2006 2005 £m £m Payments due to vendors 147.6 138.7Liabilities in respect of put option agreements with vendors 28.8 39.6Other creditors and accruals 155.5 151.9 331.9 330.2 The following table sets out the directors' best estimates of future deferredand earnout related obligations: 2006 2005 £m £m Within one year 87.9 81.3Between 1 and 2 years 36.1 71.9Between 2 and 3 years 34.6 14.7Between 3 and 4 years 49.1 20.3Between 4 and 5 years 27.8 31.8Over 5 years - - 235.5 220.0 The Group does not consider there to be any material contingent liabilities asat 31 December 2006. WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 17. Reconciliation of movements in consolidated equity share owners' funds 2006 2005 £m £mProfit for the year attributable to equity share owners 435.8 363.9Ordinary dividends (118.9) (100.2) 316.9 263.7 Ordinary shares issued in respect of acquisitions - 506.4Other ordinary shares issued 73.0 18.3Share cancellations (218.8) (123.3)Share issue/cancellation costs (1.7) (3.6)Net additions of own shares by ESOP Trusts (38.9) (29.0)Transfer to goodwill - (5.1)Non cash share-based incentive plans (including stock options) 70.9 68.6Tax benefit of share-based payments 32.3 12.9Actuarial gain/(loss) on defined benefit pension schemes 26.0 (16.5)Deferred tax on defined benefit pension schemes 5.3 3.6Exchange adjustments on foreign currency net investments (367.0) 266.1Revaluation of other investments 9.5 21.0Financial instruments - movements during the year 14.9 (27.6)Net (deductions)/additions to equity share owners' funds (77.6) 955.5Opening equity share owners' funds 3,904.5 2,949.0Closing equity share owners' funds 3,826.9 3,904.5 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 18. Non-GAAP measures of performance Reconciliation of profit before interest and taxation to Headline PBIT for the year ended 31 December 2006 2006 2005 £m £mProfit before interest and taxation 782.7 686.7Amortisation and impairment of acquired intangible assets 43.3 25.3Goodwill impairment 35.5 46.0Goodwill write-down relating to utilisation of pre-acquisition tax losses 8.8 1.1Gains on disposal of investments (7.3) (4.3)Share of exceptional gains of associates (4.0) -Headline PBIT 859.0 754.8 Finance income 111.0 87.6Finance charges (excluding revaluation of financial instruments) (203.7) (173.4) (92.7) (85.8) Interest cover on Headline PBIT 9.3 times 8.8 times Calculation of Headline EBITDA 2006 2005 £m £mHeadline PBIT (as above) 859.0 754.8Depreciation of property, plant and equipment 129.1 111.4Amortisation of other intangible assets 13.5 10.7Headline EBITDA 1,001.6 876.9 WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 18. Non-GAAP measures of performance (continued) Reconciliation of profit before taxation to Headline PBT and Headline earnings for the year ended 31 December 2006 2006 2005 £m £m Profit before taxation 682.0 592.0 Amortisation and impairment of acquired intangible assets 43.3 25.3Goodwill impairment 35.5 46.0Goodwill write-down relating to utilisation of pre-acquisition tax losses 8.8 1.1Gains on disposal of investments (7.3) (4.3)Share of exceptional gains of associates (4.0) -Revaluation of financial instruments 8.0 8.9 Headline PBT 766.3 669.0 Taxation (199.4) (194.0)Minority interests (46.8) (34.1) Headline earnings 520.1 440.9 Ordinary dividends 118.9 100.2 Dividend cover on Headline earnings 4.4 times 4.4 times Headline PBIT margins before and after share of results of associates Margin (%) 2006 Margin (%) 2005 £m £m Revenue 5,907.8 5,373.7Headline PBIT 14.5% 859.0 14.0% 754.8Share of results of associates (excluding exceptional 37.1 33.9gains)Headline PBIT excluding share of results of 13.9% 821.9 13.4% 720.9associates WPP GROUP PLC Notes to the unaudited preliminary consolidated financial statements (continued) 18. Non-GAAP measures of performance (continued) Reconciliation of free cash flow for the year ended 31 December 2006 2006 2005 £m £mCash generated by operations 860.6 1,020.3Plus:Interest received 75.2 62.4Investment income 2.4 5.6Dividends received from associates 20.3 13.4Issue of shares 70.9 20.3Proceeds on disposal of property, plant and equipment 22.4 6.7Gains/(losses) on sale of property, plant and equipment 3.7 (1.1)Movements in working capital and provisions 171.1 (107.6)Less:Interest and similar charges paid (135.1) (128.2)Purchase of property, plant and equipment (167.8) (160.5)Purchase of other intangible assets (including capitalised computer (16.7) (10.8)software)Corporation and overseas tax paid (162.0) (136.0)Dividends paid to minority shareholders in subsidiary undertakings (28.8) (24.0)Free Cash Flow 716.2 560.5 WPP GROUP PLC GLOSSARY AND BASIS OF PREPARATION 2004 UK GAAP UK Generally Accepted Accounting Principles ('UK GAAP') extant in respect of2004 - the basis of preparation of the Group's consolidated financial statementsfor the year ended 31 December 2004, as previously reported, prior to theimplementation of International Financial Reporting Standards ('IFRS'). 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 comprises 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 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. 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 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