Final Results - PART TWO
WPP Group PLC
24 February 2003
PART 2
Appendix I
WPP GROUP PLC
Preliminary results for the year ended 31 December 2002
Unaudited preliminary consolidated profit & loss account for the year
ended 31 December 2002
Constant
Currency
Notes 2002 2001 (Note 3)
£m £m +/(-)% +/(-)%
Turnover (gross billings) 18,028.7 20,886.9 (13.7)% (10.9)%
Cost of sales (14,120.4) (16,865.2) +16.3% +13.7%
Revenue 4 3,908.3 4,021.7 (2.8)% +0.7%
Direct costs (218.2) (232.0) +5.9% +3.3%
Gross profit 3,690.1 3,789.7 (2.6)% +0.9%
Operating costs excluding goodwill (3,239.9) (3,269.4) +0.9% (2.8)%
Goodwill amortisation and impairment 9 (177.7) (14.8)
Operating profit 272.5 505.5 (46.1)% (44.4)%
Income from associates 30.0 40.8 (26.5)% (23.1)%
Profit on ordinary activities before interest,
taxation, fixed asset gains and write downs 302.5 546.3 (44.6)% (42.8)%
Profits on disposal of fixed assets 5 9.2 6.8 +35.3% +35.3%
Amounts written off fixed asset investments 5 (19.9) (70.8) +71.9% +71.9%
Net interest payable and similar charges on net (79.6) (67.5) (17.9)% (16.5)%
borrowings
Net interest charges on defined benefit pension (6.8) (3.8) (78.9)% (79.8)%
schemes
Net interest payable and similar charges (86.4) (71.3) (21.2)% (26.4)%
Profit on ordinary activities before taxation 205.4 411.0 (50.0)% (48.3)%
Taxation on profit on ordinary activities 6 (103.4) (126.1) +18.0% +18.9%
Profit on ordinary activities after taxation 102.0 284.9 (64.2)% (62.0)%
Minority interests (14.0) (13.7) (2.2)% (4.3)%
Profit attributable to ordinary share owners 88.0 271.2 (67.6)% (65.4)%
Ordinary dividends 7 (62.5) (51.6) +21.1% +21.1%
Retained profit for the year 25.5 219.6 (88.4)% (87.0)%
PBIT 1 4 480.2 561.1 (14.4)% (11.8)%
PBIT 1 margin 12.3% 14.0%
PBT 1 400.6 493.6 (18.8)% (16.6)%
Headline earnings per share 2
Basic earnings per ordinary share 8 25.5p 32.1p (20.6)% (16.6)%
Diluted earnings per ordinary share 8 24.9p 30.9p (19.4)% (15.8)%
Standard earnings per share
Basic earnings per ordinary share 8 7.9p 24.6p (67.9)% (65.5)%
Diluted earnings per ordinary share 8 7.7p 23.7p (67.5)% (65.2)%
1 PBIT: Profit on ordinary activities before interest, taxation, goodwill
amortisation and impairment, fixed asset gains and write downs.
PBT: Profit on ordinary activities before taxation, goodwill amortisation and
impairment, fixed asset gains and write downs, and net interest charges on
defined benefit pension schemes. The calculations of PBIT and PBT are presented
in Appendix IV.
2 Headline earnings per ordinary share excludes goodwill amortisation and
impairment, fixed asset gains and write downs, and net interest charges on
defined benefit pension schemes. This calculation is presented in Appendix IV.
WPP GROUP PLC
Unaudited preliminary consolidated cash flow statement for
the year ended 31 December 2002
2002 2001
Reconciliation of operating profit to £m £m
net cash inflow from operating activities:
Operating profit 272.5 505.5
Depreciation 116.6 109.9
Goodwill amortisation and impairment 177.7 14.8
Movements in working capital 213.1 (456.3)
Net cash inflow from operating activities 779.9 173.9
Dividends received from associates 9.4 14.7
Returns on investments and servicing of finance (78.2) (56.4)
United Kingdom and overseas tax paid (85.0) (77.5)
Purchase of tangible fixed assets (100.5) (118.1)
Purchase of own shares by ESOP Trust (67.6) (103.3)
Other movements 10.2 4.2
Capital expenditure and financial investment (157.9) (217.2)
Cash consideration for acquisitions (317.3) (692.8)
Cash/(overdrafts) acquired 62.8 (21.1)
Purchases of other investments (26.1) (43.2)
Proceeds from disposal of other investments 3.3 26.8
Acquisitions and disposals (277.3) (730.3)
Equity dividends paid (55.6) (44.4)
Net cash inflow/(outflow) before management of
liquid resources and financing 135.3 (937.2)
Management of liquid resources (113.6) (76.8)
Convertible bond issue proceeds 450.0 -
Eurobond issue proceeds - 614.1
Reduction of drawings on bank loans (239.3) (175.3)
Financing and share issue costs (12.9) (8.8)
Proceeds from issue of shares 24.4 69.0
Share cancellations (8.3) -
Net cash inflow from financing 213.9 499.0
Increase/(decrease) in cash and overdrafts for the year 235.6 (515.0)
Translation difference (0.4) 10.7
Balance of cash and overdrafts at beginning of year 265.7 770.0
Balance of cash and overdrafts at end of year 500.9 265.7
Reconciliation of net cash flow to movement in net debt:
Increase/(decrease) in cash and overdrafts for the year 235.6 (515.0)
Cash outflow from increase in liquid resources 113.6 76.8
Cash inflow from increase in debt financing (201.2) (430.0)
Other movements (8.8) (1.1)
Translation difference 23.2 8.8
Movement of net debt in the year 162.4 (860.5)
Net debt at beginning of year (885.1) (24.6)
Net debt at end of year (Note 13) (722.7) (885.1)
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet
as at 31 December 2002
Notes 2002 2001
£m £m
Fixed assets
Intangible assets:
Corporate brands 950.0 950.0
Goodwill 9 4,407.0 4,439.9
Tangible assets 377.3 432.8
Investments 9 628.7 553.5
6,363.0 6,376.2
Current assets
Stocks and work in progress 271.6 236.9
Debtors 10 2,256.4 2,391.8
Trade debtors within working capital facility:
Gross debts 385.7 331.0
Non-returnable proceeds (217.4) (82.5)
168.3 248.5
Current asset investments (short-term bank and escrow
deposits) 190.4 76.8
Cash at bank and in hand 689.1 585.6
3,575.8 3,539.6
Creditors: amounts falling due within one year 11 (4,100.1) (4,322.0)
Net current liabilities (524.3) (782.4)
Total assets less current liabilities 5,838.7 5,593.8
Creditors: amounts falling due after more than one
year (including convertible loan notes) 12 (1,837.5) (1,711.5)
Provisions for liabilities and charges (102.0) (106.1)
Net assets excluding pension provision 3,899.2 3,776.2
Pension provision (184.8) (135.3)
Net assets including pension provision 3,714.4 3,640.9
Capital and reserves
Called up share capital 115.7 115.0
Share premium account 836.6 805.2
Shares to be issued 195.7 238.6
Merger reserve 2,869.3 2,824.7
Other reserves (254.3) (336.8)
Profit and loss account (87.4) (46.9)
Equity share owners' funds 3,675.6 3,599.8
Minority interests 38.8 41.1
Total capital employed 3,714.4 3,640.9
WPP GROUP PLC
Unaudited preliminary consolidated statement of total recognised gains and
losses
for the year ended 31 December 2002
2002 2001
£m £m
Profit for the year 88.0 271.2
Exchange adjustments on foreign currency net investments 82.2 (80.6)
Actuarial loss on defined benefit pension schemes in accordance
with FRS17 (Retirement Benefits) (52.8) (43.0)
Total recognised gains and losses relating to the year 117.4 147.6
Unaudited preliminary reconciliation of movements in consolidated share owners'
funds
for the year ended 31 December 2002
2002 2001
£m £m
Profit for the year 88.0 271.2
Ordinary dividends payable (62.5) (51.6)
25.5 219.6
Exchange adjustments on foreign currency net investments 82.2 (80.6)
Ordinary shares issued in respect of acquisitions 8.2 64.7
Share issue costs charged to share premium account or merger reserve (3.4) (1.0)
Other share issues 24.4 68.2
Share cancellations (8.3) -
Actuarial loss on defined benefit schemes (52.8) (43.0)
Write back of goodwill on disposal of interest in associate undertaking - 2.0
Net additions to equity share owners' funds 75.8 229.9
Opening equity share owners' funds 3,599.8 3,369.9
Closing equity share owners' funds 3,675.6 3,599.8
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (Notes
1-15)
1. Basis of accounting
The unaudited preliminary consolidated financial statements are prepared under
the historical cost convention.
2. Accounting policies
The unaudited preliminary consolidated financial statements comply with relevant
accounting standards and have been prepared using accounting policies set out on
pages 58 and 59 of the Group's 2001 Annual Report and Accounts. No changes have
been made to the accounting policies since this time.
The policies set out in the 2001 Annual Report and Accounts are in accordance
with accounting principles generally accepted in the United Kingdom (UK GAAP).
Statutory Information and Audit Review
The financial information for the years ended 31 December 2002 or 2001 does not
constitute the company's statutory accounts. The financial information for the
year ended 31 December 2001 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The previous auditors
reported on those accounts; their report was unqualified and did not contain a
statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for
the year ended 31 December 2002 will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement and will
be delivered to the Registrar of Companies following the company's annual
general meeting. The audit report for the year ended 31 December 2002 has yet
to be signed.
The preliminary announcement was approved by the board of directors on 23
February 2003.
3. Currency conversion
The 2002 unaudited preliminary consolidated profit and loss account is prepared
using, among other currencies, an average exchange rate of US$1.5036 to the
pound (2001:US$1.4401). The unaudited preliminary consolidated balance sheet as
at 31 December 2002 has been prepared using the exchange rate on that day of
US$1.6100 to the pound (2001: US$1.4542).
The unaudited preliminary consolidated profit and loss account and balance sheet
are presented in Euros in Appendix II for illustrative purposes. The unaudited
preliminary consolidated profit and loss account has been prepared using an
average exchange rate of Euros1.5910 to the pound (2001: Euros1.6086). The
unaudited preliminary consolidated balance sheet at 31 December 2002 has been
prepared using the exchange rate on that day of Euros1.5345 to the pound (2001:
Euros1.6322).
The constant currency percentage changes shown on the face of the profit and
loss account have been calculated by applying 2002 exchange rates to the results
for 2001 and 2002.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
4. Segmental analysis
Reported contributions by geographical area were as follows:
2002 2001 +/(-)%
£m £m
Revenue
United Kingdom 619.2 627.3 (1.3)%
United States 1,655.0 1,763.1 (6.1)%
Continental Europe 929.6 870.9 +6.7%
Canada, Asia Pacific, Latin America, Africa & Middle East 704.5 760.4 (7.4)%
3,908.3 4,021.7 (2.8)%
PBIT(1)
United Kingdom 67.5 73.9 (8.7)%
United States 239.2 257.6 (7.1)%
Continental Europe 99.7 119.7 (16.7)%
Canada, Asia Pacific, Latin America, Africa & Middle East 73.8 109.9 (32.8)%
480.2 561.1 (14.4)%
Reported contributions by operating sector were as follows:
2002 2001 +/(-)%
£m £m
Revenue
Advertising and Media investment management 1,810.0 1,841.5 (1.7)%
Information and consultancy 598.6 590.3 +1.4%
Public relations and public affairs 447.6 502.1 (10.9)%
Branding and identity, Healthcare and Specialist 1,052.1 1,087.8 (3.3)%
communications
3,908.3 4,021.7 (2.8)%
PBIT(1)
Advertising and Media investment management 274.7 319.4 (14.0)%
Information and consultancy 42.4 57.6 (26.4)%
Public relations and public affairs 46.5 48.3 (3.7)%
Branding and identity, Healthcare and Specialist 116.6 135.8 (14.1)%
communications
480.2 561.1 (14.4)%
(1)PBIT: Profit on ordinary activities before interest, taxation, goodwill
amortisation and impairment, fixed asset gains and write downs.
The calculation of PBIT is presented in Appendix IV.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
5. Fixed asset gains and write downs
The profits on disposal of fixed assets comprise:
2002 2001
£m £m
Profits on disposal of freehold properties 3.6 -
Profits on disposal of investments 5.6 6.8
9.2 6.8
Profits were realised on the disposal of two freehold properties in the United
Kingdom and on a number of minority investments in new media and marketing
services companies in the United States and United Kingdom.
Amounts written off fixed asset investments of £19.9 million (2001: £70.8
million) relate to write downs on certain non-core minority investments in new
media companies and other technology ventures in light of the continuing decline
in technology equity valuations. Following these write downs, investments in
which the Group has less than a 20% interest amount to £24.9 million.
These transactions did not have a material effect on the Group's tax charge
(2001: £8.6 million charge).
During the year, the Group continued to take measures to reduce its fixed and
variable cost base in response to the continuing global downturn in its core
markets. These actions resulted in a number of charges which, although recurring
in nature, were at a considerably higher level than would normally be expected.
These items principally comprised property rationalisation costs and severance
payments. In addition, due to the above market factors, amounts were written off
trade receivables and other current assets.
At the same time the group has released £13.0 million (2001: £22.5 million) to
operating profit relating to excess provisions established in respect of
acquisitions completed prior to 2001.
Management consider that the combination of the above charges and releases, when
taken together, in no way impacts the Group's quality of earnings.
6. Taxation
The Group tax rate on profit on ordinary activities before taxation,
amortisation, impairment, fixed asset gains and write downs is 26% (2001: 27%).
The tax charge comprises:
2002 2001
£m £m
Total current tax 93.8 122.1
Total deferred tax (1.5) (5.5)
Share of associates tax 11.1 16.4
103.4 133.0
Tax on investment gains - (6.9)
Total tax on profits 103.4 126.1
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
7. Ordinary dividends
The Board has recommended a final dividend of 3.67p (2001: 3.06p)
per ordinary share. In addition to the interim dividend paid of 1.73p (2001:
1.44p) per ordinary share, this makes a total for the year of 5.40p (2001:
4.50p) per ordinary share. The final dividend is expected to be paid on 7 July
2003 to share owners on the register at 6 June 2003.
2002 2001
Ordinary dividend per share -
interim 1.73p 1.44p
final 3.67p 3.06p
5.40p 4.50p
Ordinary dividend per ADR1 -
interim 13.0c 10.4c
final 27.6c 22.0c
40.6c 32.4c
1 These figures have been translated for convenience purposes only, using the
profit and loss exchange rate shown in note 3.
This translation should not be construed as a representation that the pound
sterling amounts actually represent, or could be converted into, US dollars at
the rates indicated.
8. Earnings per share
Basic and diluted earnings per share have been calculated in accordance with
FRS14 "Earnings per Share".
Headline basic earnings per share have been calculated using earnings of £88.0
million (2001: £271.2 million), and adjusted for goodwill amortisation and
impairment, fixed asset gains and write downs and net interest charges on
defined benefit pension schemes of £195.2 million (2001: £82.6 million). The
weighted average number of shares in issue used was 1,110,556,878 shares (2001:
1,101,937,750 shares).
Headline diluted earnings per share have been calculated using earnings of £88.0
million (2001: £271.2 million) and adjusted for goodwill amortisation and
impairment, fixed asset gains and write downs and net interest charges on
defined benefit pension schemes of £195.2 million (2001: £82.6 million). The
weighted average number of shares in issue used was 1,136,548,459 shares (2001:
1,157,080,255 shares). This takes into account the exercise of employee share
options, where these are expected to dilute earnings, and convertible debt. For
the year ended 31 December 2002 both the $287.5 million convertible loan note
and the £450 million convertible bond were accretive to earnings and therefore
excluded from the calculation. For the year ended 31 December 2001 the $287.5
million convertible bond was dilutive and earnings were consequently adjusted by
£3.6 million for the purposes of this calculation.
Standard basic earnings per share have been calculated using earnings of £88.0
million (2001: £271.2 million) and weighted average shares in issue during the
period of 1,110,556,878 shares (2001: 1,101,937,750 shares).
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
Standard diluted earnings per share have been calculated using earnings of £88.0
million (2001: £271.2 million). The weighted average number of shares used was
1,136,548,459 shares (December 2001: 1,157,080,255 shares). This takes into
account the exercise of employee share options where these are expected to
dilute earnings and convertible debt. For the year ended 31 December 2002 both
the $287.5 million convertible loan note and the £450 million convertible bond
were accretive to earnings and therefore excluded from the calculation. For the
year ended 31 December 2001 the $287.5 million convertible bond was dilutive and
earnings were consequently adjusted by £3.6 million for the purposes of this
calculation.
At 31 December 2002 there were 1,157,325,640 ordinary shares in issue.
Constant
Currency
(Note 3)
Earnings per ADR 2002 2001 +/(-)% +/(-)%
Headline earnings per ADR 1,2
Basic earning per ADR $1.92 $2.31 (16.9)% (16.6)%
Diluted earnings per ADR $1.87 $2.22 (15.8)% (15.8)%
Standard earnings per ADR 1
Basic earnings per ADR $0.59 $1.77 (66.7)% (65.5)%
Diluted earnings per ADR $0.58 $1.71 (66.1)% (65.2)%
1 These figures have been translated for convenience purposes only, using
the profit and loss exchange rate shown in note 3. This translation should not
be construed as a representation that the pound sterling amounts actually
represent, or could be converted into, US dollars at the rates indicated.
2 Headline earnings per ADR excludes goodwill amortisation and
impairment, fixed asset gains and write downs, and net interest charges on
defined benefit pension schemes.
9. Goodwill and acquisitions
During the year, the Group charged £32.0 million (2001: £14.8 million) of
goodwill amortisation and £145.7 million (2001: £Nil) of goodwill impairment to
the profit and loss account, a total of £177.7 million (2001: £14.8 million).
The impairment charge of £145.7 million represents 3.2% of goodwill shown in the
balance sheet at the start of the year.
The impairment charge relates to a number of under-performing businesses in the
information and consultancy, and branding and identity, healthcare and
specialist communications sectors. The impact of the current economic climate on
these businesses is sufficiently severe to indicate an impairment to the
carrying value of goodwill. £120.6 million (more than 80%) of the impairment
charge relates to goodwill that was previously being amortised.
The Group conducted its impairment review of goodwill in accordance with FRS 11
(Impairment of fixed assets and goodwill). This included an assessment of the
recoverability of goodwill relating to Young & Rubicam and mediaedge:cia using
medium and long-term business plans. For both businesses there was no indication
of an impairment.
The directors continue to assess the useful life of goodwill arising on
acquisitions. Gross goodwill of £572.3 million is subject to amortisation over
periods of between 10 and 20 years.
Goodwill on subsidiary undertakings decreased by £32.9 million in the year.
Other than amortisation and impairment this includes both goodwill arising on
acquisitions completed in the year and also adjustments to goodwill relating to
acquisitions completed in prior years. Acquisitions of associate undertakings
gave rise to a further £10.2 million of goodwill, which is included in
investments.
These acquisitions do not have a significant impact on the Group's results for
the year ended 31 December 2002.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
Cash paid in respect of acquisitions was £317.3 million (2001: £692.8 million).
This includes £141.2 million of initial cash consideration, £82.4 million of
earnout consideration resulting from acquisitions in prior years and £93.7
million of loan note redemptions.
Future anticipated payments to vendors in respect of earnouts, totalled £237.8
million (2001: £288.2 million), based on the directors' best estimates of future
obligations, which are dependent on the future performance of the interests
acquired and assume the operating companies improve profits in line with
directors' estimates.
10. Debtors
The following are included in debtors:
2002 2001
£m £m
Trade debtors outside working capital facility 1,753.0 1,840.5
Prepayments and accrued income 122.8 126.0
Deferred tax 61.6 61.5
Other debtors 319.0 363.8
2,256.4 2,391.8
The deferred tax asset is regarded as recoverable since, based on all available
evidence, including forecasts of profit, it is more likely than not there will
be suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted.
11. Creditors: amounts falling due within one year
The following are included in creditors falling due within one year:
2002 2001
£m £m
Bank loans and overdrafts 199.7 319.9
Trade creditors 2,477.8 2,506.2
Corporate income tax payable 29.9 51.3
Deferred income 315.0 322.2
Earnouts (note 9) 73.6 103.1
Loan notes due to vendors 27.3 61.5
Other creditors and accruals 976.8 957.8
4,100.1 4,322.0
Overdraft balances included within bank loans and overdrafts amount to £188.2
million (2001: £319.9 million).
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
12. Creditors: amounts falling due after more than one year
The following are included in creditors falling due after more than one year:
2002 2001
£m £m
Corporate bonds, convertible loan
notes and bank loans 1,402.5 1,227.6
Corporate income tax payable 215.7 222.2
Earnouts (note 9) 164.2 185.1
Other creditors and accruals 55.1 76.6
1,837.5 1,711.5
The following table sets out the directors' best estimates of future earnout
related obligations:
2002 2001
£m £m
Within one year 73.6 103.1
Between 1 and 2 years 75.9 48.9
Between 2 and 3 years 20.8 60.0
Between 3 and 4 years 36.5 25.3
Between 4 and 5 years 29.0 43.3
Over 5 years 2.0 7.6
237.8 288.2
The corporate bonds, convertible loan notes, bank loans and overdrafts included
within short and long term creditors fall due for repayment as follows:
2002 2001
£m £m
Within one year 199.7 319.9
Between 1 and 2 years 227.4 221.7
Between 2 and 3 years 302.3 212.0
Between 3 and 4 years - 334.0
Between 4 and 5 years 420.1 -
Over 5 years 452.7 459.9
1,602.2 1,547.5
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
13. Net debt
2002 2001
£m £m
Cash at bank and in hand 689.1 585.6
Current asset investments 190.4 76.8
Bank loans and overdrafts due
within one year (note 11) (199.7) (319.9)
Corporate bond and loans due
after one year (note 12) (1,402.5) (1,227.6)
Net debt (722.7) (885.1)
During the year, the Group completed the issue of £450 million of 2% convertible
bonds due April 2007. Net proceeds of the offering were used to reduce drawings
on credit facilities.
Current asset investments represents cash on deposit with a maturity of greater
than 24 hours.
There are no investor put options on any outstanding debt instruments.
14. Contingent liabilities in respect of option agreements
WPP has entered into agreements with certain shareowners of partially owned
subsidiaries and associate companies to acquire additional equity interests.
These agreements typically contain options requiring WPP to purchase their
shares at specified times up to 2009 on the basis of average earnings both
before and after the exercise of the option.
All arrangements contain clauses that cap the maximum amount payable by WPP. The
table below shows the illustrative amounts that would be payable by WPP in
respect of these options, on the basis of the relevant companies' current
financial performance, if all the options had been exercised at 31 December
2002.
Currently Not Currently
Exercisable Exercisable Total
£m £m £m
Subsidiaries 8.5 24.5 33.0
Associates 11.0 8.8 19.8
Total 19.5 33.3 52.8
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (continued)
15. Share options - illustrative charge
Appendix III illustrates the impact on WPP were it to adopt an approach to
expensing the weighted average fair value of options consistent with current
United States transitional guidelines under the prospective adoption method
contained within FAS 148, adopting a Black Scholes valuation model. This would
give rise to a charge to operating profit of £5.0 million (£4.3 million after
taxation) for the year ended 31 December 2002 in respect of executive share
options granted in 2002.
On a proforma basis, had WPP adopted a policy of charging the weighted average
fair value of options to the profit and loss account over the vesting period
(three years) of each options grant, adopting a Black Scholes basis of
valuation, then the resulting charge to operating profit would be £22.4 million
(£20.0 million after taxation or 7.1% of headline earnings) for the year ended
31 December 2002, (£9.9 million after taxation or 3.3% of headline earnings for
the year ended 31 December 2001).
The following assumptions have been made in determining the fair value of
options granted in the year:
UK Risk-free rate 4.51%
US Risk-free rate 3.01%
Expected life 48 months
Expected volatility 45%
Dividend yield 1.0%
Appendix II
WPP GROUP PLC
Preliminary results for the year ended 31 December 2002
Unaudited preliminary consolidated profit & loss account for the year ended 31
December 2002
Presented in Euros for illustrative purposes only3
2002 2001
Euros m Euros m
Turnover (gross billings) 28,683.7 33,598.7
Costs of sales (22,465.6) (27,129.4)
Revenue 6,218.1 6,469.3
Direct Costs (347.2) (373.2)
Gross Profit 5,870.9 6,096.1
Operating costs excluding goodwill (5,154.7) (5,259.2)
Goodwill amortisation and impairment (282.7) (23.8)
Operating profit 433.5 813.1
Income from associates 47.7 65.6
Profit on ordinary activities before interest,
taxation, fixed asset and write-downs 481.2 878.7
Profits on disposal of fixed assets 14.6 10.9
Amounts written off fixed asset investments (31.7) (113.9)
Net interest payable and similar charges on net
borrowings (126.6) (108.6)
Net interest charges on defined benefit pension
schemes (10.8) (6.1)
Net interest payable and similar charges (137.4) (114.7)
Profit on ordinary activities before taxation 326.7 661.0
Taxation on profit on ordinary activities (164.5) (202.8)
Profit on ordinary activities after taxation 162.2 458.2
Minority interests (22.3) (22.0)
Profit attributable to ordinary share owners 139.9 436.2
Ordinary dividends (99.4) (83.0)
Retained profit for the year 40.5 353.2
PBIT 1 764.0 902.5
PBIT 1 margin 12.3% 14.0%
PBT 1 637.3 793.9
Headline earnings per share 2
Basic earnings per ordinary share 40.6c 51.6c
Diluted earnings per ordinary share 39.6c 49.7c
Standard earnings per share
Basic earnings per ordinary share 12.6c 39.6c
Diluted earnings per ordinary share 12.3c 38.1c
1 PBIT: Profit on ordinary activities before interest, taxation, excluding
goodwill amortisation and impairment, fixed asset gains and write downs.
PBT: Profit on ordinary activities before taxation, excluding goodwill
amortisation and impairment, fixed asset gains and write downs, and net
interest charges on defined benefit pension schemes.
2 Headline earnings per ordinary share exclude goodwill amortisation and
impairment, investment gains and write downs, and net interest charges on
defined benefit pension schemes.
3 These figures have been translated for convenience purposes only, using the
profit and loss exchange rates shown in Note 3.
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet as at 31 December 2002
Presented in Euros for illustrative purposes only1
2002 2001
Euros m Euros m
Fixed assets
Intangible assets:
Corporate brands 1,457.8 1,550.6
Goodwill 6,762.5 7,246.8
Tangible assets 579.0 706.4
Investments 964.7 903.4
9,764.0 10,407.2
Current assets
Stocks and work in progress 416.8 386.7
Debtors 3,462.4 3,903.9
Trade debtors within working capital facility:
Gross debts 591.9 540.3
Non-returnable proceeds (333.6) (134.7)
258.3 405.6
Current asset investments (short-term bank and escrow deposits) 292.2 125.4
Cash at bank and in hand 1,057.4 955.8
5,487.1 5,777.4
Creditors: amounts falling due within one year (6,291.6) (7,054.4)
Net current liabilities (804.5) (1,277.0)
Total assets less current liabilities 8,959.5 9,130.2
Creditors: amounts falling due after more than one year
(including convertible loan notes) (2,819.7) (2,793.5)
Provisions for liabilities and charges (156.5) (173.2)
Net assets excluding pension provision 5,983.3 6,163.5
Pension provision (283.6) (220.8)
Net assets including pension provision 5,699.7 5,942.7
Capital and reserves
Called up share capital 177.5 187.7
Share premium account 1,279.9 1,314.2
Shares to be issued 300.3 389.4
Merger reserve 4,406.8 4,610.5
Other reserves (390.2) (549.6)
Profit and loss account (134.1) (76.6)
Equity share owners' funds 5,640.2 5,875.6
Minority interests 59.5 67.1
Total capital employed 5,699.7 5,942.7
1 These figures have been translated for convenience purposes only, using the
profit and loss exchange rates shown in Note 3.
Appendix III
WPP GROUP PLC
To present the impact of US transitional guidelines on the expensing of share
options, for illustrative purposes only
Unaudited preliminary pro forma consolidated profit and loss account for the
year ended 31 December 2002
2002 2001
£m £m
Turnover (gross billings) 18,028.7 20,886.9
Cost of sales (14,120.4) (16,865.2)
Revenue 3,908.3 4,021.7
Direct costs (218.2) (232.0)
Gross Profit 3,690.1 3,789.7
Operating costs excluding goodwill (3,239.9) (3,269.4)
Fair value of share options (5.0) -
Goodwill amortisation and impairment (177.7) (14.8)
Operating profit 267.5 505.5
Income from associates 30.0 40.8
Profit on ordinary activities before interest, taxation,
fixed asset gains and write-downs 297.5 546.3
Profits on disposal of fixed assets 9.2 6.8
Amounts written off fixed asset investments (19.9) (70.8)
Net interest payable and similar charges on net borrowings (79.6) (67.5)
Net interest charges on defined benefit pension schemes (6.8) (3.8)
Net interest payable and similar charges (86.4) (71.3)
Profit on ordinary activities before taxation 200.4 411.0
Taxation on profit on ordinary activities (102.7) (126.1)
Profit on ordinary activities after taxation 97.7 284.9
Minority interests (14.0) (13.7)
Profit attributable to ordinary share owners 83.7 271.2
Ordinary dividends (62.5) (51.6)
Retained profit for the year 21.2 219.6
PBIT 1 475.2 561.1
PBIT 1 margin 12.2% 14.0%
PBT 1 395.6 493.6
Headline earnings per share 2
Basic earnings per ordinary share 25.1p 32.1p
Diluted earnings per ordinary share 24.5p 30.9p
Standard earnings per share
Basic earnings per ordinary share 7.5p 24.6p
Diluted earnings per ordinary share 7.4p 23.7p
Headline earnings per ADR 2,3
Basic earnings per ADR $1.89 $2.31
Diluted earnings per ADR $1.84 $2.22
Standard earnings per ADR 3
Basic earnings per ADR $0.56 $1.77
Diluted earnings per ADR $0.56 $1.71
1 PBIT: Profit on ordinary activities before interest, taxation, goodwill
amortisation and impairment, fixed asset gains and write downs.
PBT: Profit on ordinary activities before taxation, goodwill amortisation and
impairment, fixed asset gains and write downs, and net interest charges on
defined benefit pension schemes.
2 Headline earnings per ordinary share and ADR excludes goodwill amortisation
and impairment, fixed asset gains and write downs and net interest charges on
defined benefit pension schemes.
3 These figures have been translated for convenience purposes only, using the
profit and loss exchange rates shown in Note 3.
Appendix IV
WPP GROUP PLC
Reconciliation of profit on ordinary activities before interest, taxation,
fixed asset gains and write downs to PBIT for the year ended 31 December 2002
2002 2001
£m £m
Profit on ordinary activities before interest, taxation, fixed asset
gains and write downs 302.5 546.3
Goodwill amortisation and impairment 177.7 14.8
PBIT 480.2 561.1
Net interest payable and similar charges 86.4 71.3
Interest cover on PBIT 5.6 times 7.9 times
2002 2001
£m £m
Interest cover on PBIT (excluding FRS17 interest)
PBIT 480.2 561.1
Net interest payable and similar charges on net borrowings 79.6 67.5
Interest cover (excluding FRS17 interest) 6.0 times 8.3 times
Reconciliation of profit on ordinary activities before taxation
to PBT and headline earnings for the year ended 31 December 2002
2002 2001
£m £m
Profit on ordinary activities before taxation 205.4 411.0
Goodwill amortisation and impairment 177.7 14.8
Profits on disposal of fixed assets (9.2) (6.8)
Amounts written off fixed asset investments 19.9 70.8
Net interest charges on defined benefit pension schemes 6.8 3.8
PBT 400.6 493.6
Taxation on profit on ordinary activities (103.4) (126.1)
Minority interests (14.0) (13.7)
Headline earnings 283.2 353.8
Ordinary dividends 62.5 51.6
Dividend cover on headline earnings 4.5 times 6.9 times
WPP GROUP PLC
Segmental margin analysis
Reported margins by geographical area were as follows:
Revenue PBIT(1) Margin (%)
£m £m
United Kingdom 619.2 67.5 10.9%
United States 1,655.0 239.2 14.5%
Continental Europe 929.6 99.7 10.7%
Canada, Asia Pacific, Latin America, Africa & Middle East 704.5 73.8 10.5%
3,908.3 480.2 12.3%
Reported margins by operating sector were as follows:
Revenue PBIT(1) Margin (%)
£m £m
Advertising and Media investment management 1,810.0 274.7 15.2%
Information and consultancy 598.6 42.4 7.1%
Public relations and public affairs 447.6 46.5 10.4%
Branding and identity, Healthcare and Specialist communications 1,052.1 116.6 11.1%
3,908.3 480.2 12.3%
Reported margins before and after income from associates were as
follows:
Margin (%) 2002 Margin (%) 2001
£m £m
Revenue 3,908.3 4,021.7
PBIT 12.3% 480.2 14.0% 561.1
Income from associates 30.0 40.8
PBIT excluding income from associates 11.5% 450.2 12.9% 520.3
(1)PBIT: Profit on ordinary activities before interest, taxation, goodwill
amortisation and impairment, fixed asset gains and write downs. The calculation
of PBIT is presented above.
WPP GROUP PLC
GLOSSARY AND BASIS OF PREPARATION
Constant currency
The Group uses US dollar-based, constant currency models to measure performance.
These are calculated by applying 2002 exchange rates to local currency reported
results for the current and prior year. This gives a US dollar - denominated
income statement and balance sheet which exclude any variances attributable to
foreign exchange rate movements.
Pro forma ('like for like')
Pro forma comparisons are calculated as follows: current year actual results
(which include acquisitions from the relevant date of completion) are compared
with prior year actual results, adjusted to include the results of acquisitions
for the commensurate period in the prior year. The Group uses the terms 'pro
forma' and 'like for like' interchangeably.
Average net debt
Average net debt is calculated as the average daily net bank borrowings of the
Group, derived from the Group's automated banking system. Net debt at a period
end is calculated as the sum of the net bank borrowings of the Group, derived
from the cash ledgers and accounts in the balance sheet.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
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