Final Results - Part Two
WPP Group PLC
27 February 2004
PART TWO
WPP GROUP PLC - PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
Appendix I
WPP GROUP PLC
Preliminary results for the year ended 31 December 2003
Unaudited preliminary consolidated profit & loss account for the year ended 31
December 2003
Constant
Currency
Notes 2003 2002 (Note 3)
£m £m +/(-)% +/(-)%
Turnover (gross billings) 18,621.3 18,028.7 3.3 5.6
Cost of sales (14,515.3) (14,120.4) (2.8) (5.2)
Revenue 4 4,106.0 3,908.3 5.1 7.3
Direct costs (237.1) (218.2) (8.7) (10.4)
Gross profit 3,868.9 3,690.1 4.8 7.2
Operating costs excluding goodwill amortisation and (3,375.9) (3,239.9) (4.2) (6.7)
impairment
Goodwill amortisation and impairment - subsidiaries 11 (77.7) (177.7) 56.3 56.3
Operating costs (3,453.6) (3,417.6) (1.1) (3.3)
Operating profit 415.3 272.5 52.4 56.3
Income from associates 40.5 30.0 35.0 32.3
Goodwill amortisation and impairment - associates 11 (34.3) -
Profit on ordinary activities before interest, taxation, 421.5 302.5 39.3 41.9
fixed asset gains and write-downs
Profits on disposal of fixed assets 5 - 9.2
Amounts written off fixed asset investments 5 - (19.9)
Net interest payable and similar charges on net borrowings (60.1) (79.6) 24.5 20.9
Net interest charges on defined benefit pension schemes (11.5) (6.8) (69.1) (72.3)
Net interest payable and similar charges (71.6) (86.4) 17.1 13.4
Profit on ordinary activities before taxation 349.9 205.4 70.4 75.1
Taxation on profit on ordinary activities 6 (122.1) (103.4) (18.1) (15.7)
Profit on ordinary activities after taxation 227.8 102.0 123.3 142.0
Minority interests (19.4) (14.0) (38.6) (34.5)
Profit attributable to ordinary share owners 208.4 88.0 136.8 161.8
Ordinary dividends 7 (76.8) (62.5) 22.9 22.9
Retained profit for the year 131.6 25.5
Headline PBIT 1 4 533.5 480.2 11.1 11.8
Headline PBIT 1 margin 13.0% 12.3%
Headline PBT 1 473.4 400.6 18.2 18.2
Headline earnings per share 2
Basic earnings per ordinary share 8 29.8p 25.5p 16.9 17.8
Diluted earnings per ordinary share 8 29.0p 24.9p 16.5 17.4
Standard earnings per share
Basic earnings per ordinary share 8 18.7p 7.9p 136.7 155.1
Diluted earnings per ordinary share 8 18.2p 7.7p 136.4 154.3
1 Headline PBIT: Profit on ordinary activities before interest, taxation,
goodwill amortisation and impairment, fixed asset gains and write-downs.
Headline 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
Headline PBIT and Headline 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. The calculation of
Headline earnings is presented in Appendix IV.
3 Constant currency is defined in Appendix IV
WPP GROUP PLC
Unaudited preliminary consolidated cash flow statement
for the year ended 31 December 2003
Notes 2003 2002
£m £m
Operating profit 415.3 272.5
Depreciation 127.5 116.6
Goodwill amortisation and impairment charges 77.7 177.7
Movements in working capital and provisions 321.5 213.1
Net cash inflow from operating activities 942.0 779.9
Dividends received from associates 15.6 9.4
Returns on investments and servicing of finance (38.3) (78.2)
United Kingdom and overseas tax paid (93.6) (85.0)
Capital expenditure and financial investment 9 (88.1) (157.9)
Acquisitions and disposals 9 (344.5) (277.3)
Equity dividends paid (67.0) (55.6)
Net cash inflow before management of liquid resources
and financing 326.1 135.3
Management of liquid resources (211.4) (113.6)
Net cash inflow from financing 9 119.7 213.9
Increase in cash and overdrafts for the year 234.4 235.6
Translation difference (19.3) (0.4)
Balance of cash and overdrafts at beginning of year 500.9 265.7
Balance of cash and overdrafts at end of year 716.0 500.9
Reconciliation of net cash flow to movement in net debt:
Increase in cash and overdrafts for the year 234.4 235.6
Cash outflow from increase in liquid resources 211.4 113.6
Cash inflow from increase in debt financing (24.3) (201.2)
Other movements (9.4) (8.8)
Translation difference (50.9) 23.2
Movement of net debt in the year 361.2 162.4
Net debt at beginning of year (722.7) (885.1)
Net debt at end of year 10 (361.5) (722.7)
Unaudited preliminary consolidated statement of total recognised gains and
losses for the year ended 31 December 2003
2003 2002
£m £m
Profit for the year 208.4 88.0
Exchange adjustments on foreign currency net investments 74.8 82.3
Actuarial gain/(loss) on defined benefit pension schemes in accordance with 14.0 (52.8)
FRS17 (Retirement Benefits)
Deferred tax on defined benefit pension schemes 10.0 -
Total recognised gains and losses relating to the year 307.2 117.5
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet
as at 31 December 2003
Notes 2003 2002
£m £m
Fixed assets
Intangible assets:
Corporate brands 950.0 950.0
Goodwill 11 4,710.3 4,407.0
Tangible assets 344.6 377.3
Investments 689.3 628.7
6,694.2 6,363.0
Current assets
Stocks and work in progress 269.6 291.6
Debtors 12 2,394.5 2,256.4
Trade debtors within working capital facility:
Gross debts 507.5 385.7
Non-returnable proceeds (280.4) (217.4)
227.1 168.3
Current asset investments
(short-term bank and escrow deposits) 401.8 190.4
Cash at bank and in hand 1,018.1 689.1
4,311.1 3,595.8
Creditors: amounts falling due within one year 13 (4,924.2) (4,120.1)
Net current liabilities (613.1) (524.3)
Total assets less current liabilities 6,081.1 5,838.7
Creditors: amounts falling due after more than one year 14
(including convertible bonds) (1,691.1) (1,837.5)
Provisions for liabilities and charges (133.5) (102.0)
Net assets excluding pension provision 4,256.5 3,899.2
Pension provision (188.9) (184.8)
Net assets including pension provision 4,067.6 3,714.4
Capital and reserves
Called up share capital 118.7 115.7
Share premium account 955.3 836.6
Shares to be issued 130.0 195.7
Merger reserve 2,921.0 2,869.3
Other reserves (178.9) (254.3)
Profit and loss account 73.4 (87.4)
Equity share owners' funds 16 4,019.5 3,675.6
Minority interests 48.1 38.8
Total capital employed 4,067.6 3,714.4
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements (Notes
1-16)
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 104 to 106 of WPP Group plc's 2002 Annual Report and Accounts. No changes
have been made to the accounting policies since this time.
The policies set out in the 2002 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 2003 or 2002 does not
constitute the company's statutory accounts. The financial information for the
year ended 31 December 2002 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The 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 2003 will be finalised on the basis of the financial
information presented by the directors in this unaudited 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 2003 has yet to be signed.
The preliminary announcement was approved by the board of directors on 26
February 2004.
3. Currency conversion
The 2003 unaudited preliminary consolidated profit and loss account is prepared
using, among other currencies, an average exchange rate of US$1.6356 to the
pound (2002:US$1.5036). The unaudited preliminary consolidated balance sheet as
at 31 December 2003 has been prepared using the exchange rate on that day of
US$1.7833 to the pound (2002: US$1.6100).
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 accounts for the years ended
31 December 2002 and 31 December 2003 have been prepared using the average
exchange rate for the year ended 31 December 2003 of €1.4450 to the pound.
The unaudited preliminary consolidated balance sheets at 31 December 2002
and 31 December 2003 have been prepared using the exchange rate on
31 December 2003 of €1.4198 to the pound.
The basis for calculating the constant currency percentage changes, shown on the
face of the unaudited preliminary consolidated profit and loss account, is
presented in Appendix IV.
4. Segmental analysis
Reported contributions by geographical area were as follows:
2003 2002 +/(-)%
£m £m
Revenue
United Kingdom 664.9 619.2 7.4
United States 1,608.5 1,655.0 (2.8)
Continental Europe 1,079.4 929.6 16.1
Canada, Asia Pacific, Latin America, Africa & Middle East 753.2 704.5 6.9
4,106.0 3,908.3 5.1
Headline PBIT(1)
United Kingdom 71.8 67.5 6.4
United States 240.7 239.2 0.6
Continental Europe 121.8 99.7 22.2
Canada, Asia Pacific, Latin America, Africa & Middle East 99.2 73.8 34.4
533.5 480.2 11.1
Reported contributions by operating sector were as follows:
2003 2002 +/(-)%
£m £m
Revenue
Advertising and Media investment management 1,935.8 1,810.0 7.0
Information, insight and consultancy2 703.6 664.7 5.9
Public relations and public affairs 426.3 447.6 (4.8)
Branding and identity, Healthcare and Specialist communications 2 1,040.3 986.0 5.5
4,106.0 3,908.3 5.1
Headline PBIT(1)
Advertising and Media investment management 295.5 274.7 7.6
Information, insight and consultancy2 50.0 48.5 3.1
Public relations and public affairs 55.0 46.5 18.3
Branding and identity, Healthcare and Specialist communications 2 133.0 110.5 20.4
533.5 480.2 11.1
(1) Headline PBIT: Profit on ordinary activities before interest, taxation,
goodwill amortisation and impairment, fixed asset gains and write-downs. The
calculation of Headline PBIT is presented in Appendix IV.
2 In 2003 certain of the Group's Specialist communications companies in
strategic marketing consulting were moved into the renamed Information, insight
and consultancy sector. As a result the comparative figures for both
Information, insight and consultancy and Branding and identity, Healthcare and
Specialist communications have been restated to reflect this change.
5. Profits on disposal of fixed assets
The net profit on disposal of fixed assets comprised:
2003 2002
£m £m
Profit on disposal of freehold property - 3.6
Net profit on disposal of investments - 5.6
- 9.2
In 2002, 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 in 2002 related to
write-downs on certain non-core minority investments in new media companies and
other technology ventures in light of the decline in technology equity
valuations.
These transactions did not have a material effect on the Group's tax charge in
2002.
During 2003, 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 £12.0 million (2002: £13.0 million) to
operating profit relating to excess provisions established in respect of
acquisitions completed prior to 2002.
Management consider that the combination of the above charges and releases, when
taken together, does not materially impact the Group's quality of earnings.
6. Taxation
The Group tax rate on headline PBT1 is 25.8% (2002: 25.8%). The tax charge
comprises:
2003 2002
£m £m
Total current tax 116.2 93.8
Total deferred tax (8.7) (1.5)
Share of associates tax 14.6 11.1
Total tax on profits 122.1 103.4
(1) Headline 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 calculation of
headline PBT is presented in Appendix IV.
7. Ordinary dividends
The Board has recommended a final dividend of 4.40p (2002: 3.67p) per ordinary
share. In addition to the interim dividend paid of 2.08p (2002: 1.73p) per
ordinary share, this makes a total for the year of 6.48p (2002: 5.40p) per
ordinary share. The final dividend is expected to be paid on 5 July 2004 to
share owners on the register at 4 June 2004.
2003 2002
Ordinary dividend per share -
interim 2.08p 1.73p
final 4.40p 3.67p
6.48p 5.40p
Ordinary dividend per ADR1 -
interim 17.0c 13.0c
final 36.0c 27.6c
53.0c 40.6c
1 These figures have been translated for convenience purposes only, using the
profit and loss exchange rates 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 £208.4
million (2002: £88.0 million), and adjusted for goodwill amortisation and
impairment, fixed asset gains and write-downs and net interest charges on
defined benefit pension schemes of £123.5 million (2002: £195.2 million). The
weighted average number of shares in issue used was 1,115,319,576 shares (2002:
1,110,556,878 shares).
Headline diluted earnings per share have been calculated using earnings of
£208.4 million (2002: £88.0 million) and adjusted for goodwill amortisation and
impairment, fixed asset gains and write-downs and net interest charges on
defined benefit pension schemes of £123.5 million (2002: £195.2 million). The
weighted average number of shares in issue used was 1,145,014,508 shares (2002:
1,136,548,459 shares). This takes into account potentially issuable ordinary
shares arising from the exercise of employee share options, certain incentive
schemes and convertible debt where these are expected to dilute earnings. For
the years ended 31 December 2003 and 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.
Standard basic earnings per share have been calculated using earnings of £208.4
million (2002: £88.0 million) and weighted average shares in issue during the
period of 1,115,319,576 shares (2002: 1,110,556,878 shares).
Standard diluted earnings per share have been calculated using earnings of
£208.4 million (2002: £88.0 million). The weighted average number of shares
used was 1,145,014,508 shares (December 2002: 1,136,548,459 shares). This takes
into account potentially issuable ordinary shares arising from the exercise of
employee share options, certain incentive schemes and convertible debt where
these are expected to dilute earnings. For the years ended 31 December 2003 and
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.
At 31 December 2003 there were 1,187,432,353 ordinary shares in issue.
8. Earnings per share (continued)
Basic and diluted earnings per ADR have been calculated below using the same
method as earnings per share, multiplied by a factor of 5.
Constant
Currency3
Earnings per ADR 2003 2002 +/(-)% +/(-)%
Headline earnings per ADR 1,2
Basic earning per ADR $2.43 $1.92 26.6 17.8
Diluted earnings per ADR $2.37 $1.87 26.7 17.4
Standard earnings per ADR 1
Basic earnings per ADR $1.53 $0.59 159.3 155.1
Diluted earnings per ADR $1.49 $0.58 156.9 154.3
1 These figures have been translated for convenience purposes only, using
the profit and loss exchange rates 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.
3 Constant currency is defined in Appendix IV.
9. Analysis of non-operating cash flows
The following tables analyse the items included within the main cash flow
headings on page 13:
2003 2002
£m £m
Capital expenditure and financial investment
Purchase of tangible fixed assets (93.9) (100.5)
Purchase of own shares by ESOP Trust (2.9) (67.6)
Proceeds from sale of tangible assets 8.7 10.2
(88.1) (157.9)
Acquisition and disposals
Cash consideration for acquisition of Cordiant (207.9) -
Proceeds from disposal of interest in Zenith Optimedia Group 75.0 -
Net cash acquired - Cordiant 37.8 -
Initial cash consideration for other acquisitions (70.1) (141.2)
Earnout payments (56.2) (82.4)
Loan note redemptions (38.7) (93.7)
Net cash acquired - other acquisitions 5.3 62.8
Purchases of other investments (including associates) (100.7) (26.1)
Proceeds from disposal of other investments (including associates) 11.0 3.3
(344.5) (277.3)
Net cash inflow from financing
Proceeds from issue of convertible bond - 450.0
Increase/(reduction) in drawings on bank loans 25.0 (239.3)
Financing and share issue costs (3.4) (12.9)
Share placement 100.2 -
Proceeds from issue of shares 18.1 24.4
Share cancellations (20.2) (8.3)
119.7 213.9
10. Net debt
2003 2002
£m £m
Cash at bank and in hand 1,018.1 689.1
Current asset investments 401.8 190.4
Bank loans and overdrafts due within one year (note 13) (552.4) (199.7)
Corporate and convertible bonds and bank loans due after more than
one year (note 14) (1,229.0) (1,402.5)
Net debt (361.5) (722.7)
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.
11. Goodwill and acquisitions
During the year, the Group charged £33.0 million (2002: £32.0 million) of
goodwill amortisation and £79.0 million (2002: £145.7 million) of goodwill
impairment to the profit and loss account, a total of £112.0 million (2002:
£177.7 million).
The impairment charge relates to a number of under-performing businesses in the
Information, insight and consultancy, and Branding and identity, Healthcare and
Specialist communications sectors. The impact of the current economic climate on
the future earnings of these businesses is sufficiently severe to indicate an
impairment to the carrying value of goodwill.
The directors continue to assess the useful life of goodwill arising on
acquisitions. Gross goodwill of £519.1 million is subject to amortisation over
periods of between 10 and 20 years.
Goodwill in relation to subsidiary undertakings increased by £303.3 million in
the year, including £269.9 million arising on the acquisition of Cordiant
Communications Group plc ("Cordiant"). 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.
Goodwill in relation to associate undertakings increased by £43.2 million in the
period. Acquisitions contributed revenue of £183.4 million, operating profit of
£16.4 million and profit on ordinary activities before interest, taxation, fixed
asset gains and write-downs of £22.3 million.
Future anticipated payments to vendors in respect of earnouts, totalled £215.7
million (2002: £237.8 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.
On 1 August 2003, the Group completed its acquisition, via a scheme of
arrangement, of Cordiant. The results of Cordiant have been consolidated into
the results of WPP Group plc from that date.
12. Debtors
The following are included in debtors:
2003 2002
£m £m
Trade debtors outside working capital facility 1,883.4 1,753.0
Prepayments and accrued income 159.5 122.8
Deferred tax 70.0 61.6
Other debtors 281.6 319.0
2,394.5 2,256.4
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.
13. Creditors: amounts falling due within one year
The following are included in creditors falling due within one year:
2003 2002
£m £m
Bank loans and overdrafts 552.4 199.7
Trade creditors 2,733.3 2,477.8
Corporate income tax payable 29.5 29.9
Dividend proposed 52.2 42.5
Deferred income 391.9 335.0
Payments due to vendors (earnout agreements) 81.6 73.6
Loan notes due to vendors 13.9 27.3
Other creditors and accruals 1,069.4 934.3
4,924.2 4,120.1
Bank loans and overdrafts include overdrafts of £302.1 million (2002: £188.2
million).
14. Creditors: amounts falling due after more than one year
The following are included in creditors falling due after more than one year:
2003 2002
£m £m
Corporate and convertible bonds and bank loans 1,229.0 1,402.5
Corporate income tax payable 268.7 215.7
Payments due to vendors (earnout agreements) 134.1 164.2
Other creditors and accruals 59.3 55.1
1,691.1 1,837.5
14. Creditors: amounts falling due after more than one year (continued)
The following table sets out the directors' best estimates of future earnout
related obligations:
2003 2002
£m £m
Within one year 81.6 73.6
Between 1 and 2 years 60.9 75.9
Between 2 and 3 years 32.4 20.8
Between 3 and 4 years 37.0 36.5
Between 4 and 5 years 3.8 29.0
Over 5 years - 2.0
215.7 237.8
The corporate bonds, convertible loan notes, bank loans and overdrafts included
within short and long term creditors fall due for repayment as follows:
2003 2002
£m £m
Within one year 552.4 199.7
Between 1 and 2 years 273.1 227.4
Between 2 and 3 years - 302.3
Between 3 and 4 years 443.4 -
Between 4 and 5 years 512.5 420.1
Over 5 years - 452.7
1,781.4 1,602.2
15. Contingent liabilities in respect of option agreements
WPP has entered into agreements with certain share owners 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
2003.
Currently Not Currently Total
Exercisable Exercisable
£m £m £m
Subsidiaries 10.4 30.4 40.8
Associates 4.1 10.1 14.2
Total 14.5 40.5 55.0
16. Reconciliation of movements in consolidated share owners'
funds
2003 2002
£m £m
Profit for the year 208.4 88.0
Ordinary dividends payable (76.8) (62.5)
131.6 25.5
Exchange adjustments on foreign currency net investments 74.8 82.3
Ordinary shares issued in respect of acquisitions 16.9 8.2
Share placement 100.2 -
Share issue costs charged to share premium account or merger reserve (2.8) (3.4)
Other share issues 18.1 24.3
Share cancellations (20.2) (8.3)
Other movements 1.3 -
Actuarial gain/(loss) on defined benefit schemes 14.0 (52.8)
Deferred tax on defined benefit pension schemes 10.0 -
Net additions to equity share owners' funds 343.9 75.8
Opening equity share owners' funds 3,675.6 3,599.8
Closing equity share owners' funds 4,019.5 3,675.6
Appendix II
WPP GROUP PLC
Unaudited preliminary consolidated profit & loss account for the year ended 31
December 2003 Presented in Euros for illustrative purposes only3
2003 2002
Euro m Euro m
Turnover (gross billings) 26,907.8 26,051.5
Costs of sales (20,974.6) (20,404.0)
Revenue 5,933.2 5,647.5
Direct Costs (342.6) (315.3)
Gross Profit 5,590.6 5,332.2
Operating costs excluding goodwill amortisation and impairment (4,878.2) (4,681.7)
Goodwill amortisation and impairment - subsidiaries (112.3) (256.8)
Operating costs (4,990.5) (4,938.5)
Operating profit 600.1 393.7
Income from associates 58.5 43.4
Goodwill amortisation and impairment - associates (49.5) -
Profit on ordinary activities before interest, taxation, fixed
asset and write-downs 609.1 437.1
Profits on disposal of fixed assets - 13.3
Amounts written off fixed asset investments - (28.8)
Net interest payable and similar charges on net borrowings (86.9) (115.0)
Net interest charges on defined benefit pension schemes (16.6) (9.8)
Net interest payable and similar charges (103.5) (124.8)
Profit on ordinary activities before taxation 505.6 296.8
Taxation on profit on ordinary activities (176.4) (149.4)
Profit on ordinary activities after taxation 329.2 147.4
Minority interests (28.0) (20.2)
Profit attributable to ordinary share owners 301.2 127.2
Ordinary dividends (111.0) (90.3)
Retained profit for the year 190.2 36.9
Headline PBIT 1 770.9 693.9
Headline PBIT 1 margin 13.0% 12.3%
Headline PBT 1 684.1 578.9
Headline earnings per share 2
Basic earnings per ordinary share 43.1c 36.8c
Diluted earnings per ordinary share 41.9c 36.0c
Standard earnings per share
Basic earnings per ordinary share 27.0c 11.4c
Diluted earnings per ordinary share 26.3c 11.1c
1 Headline PBIT: Profit on ordinary activities before interest, taxation,
excluding goodwill amortisation and impairment, fixed asset gains and
write-downs. Headline 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 rate shown in Note 3 of Appendix I.
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet as at 31 December 2003
Presented in Euros for illustrative purposes only1
2003 2002
Euro m Euro m
Fixed assets
Intangible assets:
Corporate brands 1,348.8 1,348.8
Goodwill 6,687.7 6,257.1
Tangible assets 489.2 535.7
Investments 978.7 892.6
9,504.4 9,034.2
Current assets
Stocks and work in progress 382.8 414.0
Debtors 3,399.7 3,203.6
Trade debtors within working capital facility:
Gross debts 720.5 547.6
Non-returnable proceeds (398.1) (308.7)
322.4 239.0
Current asset investments (short-term bank and escrow deposits) 570.5 270.3
Cash at bank and in hand 1,445.5 978.4
6,120.9 5,105.3
Creditors: amounts falling due within one year (6,991.4) (5,849.7)
Net current liabilities (870.5) (744.4)
Total assets less current liabilities 8,633.9 8,289.8
Creditors: amounts falling due after more than one year (2,401.0) (2,608.9)
(including convertible loan notes)
Provisions for liabilities and charges (189.5) (144.8)
Net assets excluding pension provision 6,043.4 5,536.1
Pension provision (268.2) (262.4)
Net assets including pension provision 5,775.2 5,273.7
Capital and reserves
Called up share capital 168.5 164.3
Share premium account 1,356.3 1,187.8
Shares to be issued 184.6 277.9
Merger reserve 4,150.1 4,073.8
Other reserves (256.8) (361.1)
Profit and loss account 104.2 (124.1)
Equity share owners' funds 5,706.9 5,218.6
Minority interests 68.3 55.1
Total capital employed 5,775.2 5,273.7
1 These figures have been translated for convenience purposes only, using the
balance sheet exchange rate shown in Note 3 of Appendix I.
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 2003
2003 2002
£m £m
Turnover (gross billings) 18,621.3 18,028.7
Cost of sales (14,515.3) (14,120.4)
Revenue 4,106.0 3,908.3
Direct costs (237.1) (218.2)
Gross Profit 3,868.9 3,690.1
Operating costs excluding goodwill amortisation and impairment (3,375.9) (3,239.9)
Fair value of share options (13.9) (5.0)
Goodwill amortisation and impairment - subsidiaries (77.7) (177.7)
Operating costs (3,467.5) (3,422.6)
Operating profit 401.4 267.5
Income from associates 40.5 30.0
Goodwill amortisation and impairment - associates (34.3) -
Profit on ordinary activities before interest, taxation, fixed 407.6 297.5
asset gains and write-downs
Profits on disposal of fixed assets - 9.2
Amounts written off fixed asset investments - (19.9)
Net interest payable and similar charges on net borrowings (60.1) (79.6)
Net interest charges on defined benefit pension schemes (11.5) (6.8)
Net interest payable and similar charges (71.6) (86.4)
Profit on ordinary activities before taxation 336.0 200.4
Taxation on profit on ordinary activities (120.6) (102.7)
Profit on ordinary activities after taxation 215.4 97.7
Minority interests (19.4) (14.0)
Profit attributable to ordinary share owners 196.0 83.7
Ordinary dividends (76.8) (62.5)
Retained profit for the year 119.2 21.2
Headline PBIT 1 519.6 475.2
Headline PBIT 1 margin 12.7% 12.2%
Headline PBT 1 459.5 395.6
Headline earnings per share 2
Basic earnings per ordinary share 28.6p 25.1p
Diluted earnings per ordinary share 27.9p 24.5p
Standard earnings per share
Basic earnings per ordinary share 17.6p 7.5p
Diluted earnings per ordinary share 17.1p 7.4p
Headline earnings per ADR 2,3
Basic earnings per ADR $2.34 $1.89
Diluted earnings per ADR $2.28 $1.84
Standard earnings per ADR 3
Basic earnings per ADR $1.44 $0.56
Diluted earnings per ADR $1.40 $0.56
1 Headline PBIT: Profit on ordinary activities before interest, taxation,
goodwill amortisation and impairment, fixed asset gains and write-downs.
Headline 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 of Appendix I.
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 £13.9 million (3.7% of headline
earnings) for the year ended 31 December 2003 and £5.0 million (1.5% of headline
earnings) for the year ended 31 December 2002, in respect of executive share
options granted since 1 January 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 of
each options grant, adopting a Black Scholes basis of valuation, then the
resulting charge to operating profit would be £23.8 million (6.4% of headline
earnings) for the year ended 31 December 2003, and £22.4 million (7.1% of
headline earnings) for the year ended 31 December 2002.
The following assumptions have been made in determining the fair value of
options granted in the year:
UK Risk-free rate 4.38%
US Risk-free rate 2.67%
Expected life 48 months
Expected volatility 45%
Dividend yield 1.0%
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 2003
2003 2002
£m £m
Profit on ordinary activities before interest, taxation, fixed asset
gains and write-downs 421.5 302.5
Goodwill amortisation and impairment 112.0 177.7
Headline PBIT 533.5 480.2
Net interest payable and similar charges 71.6 86.4
Interest cover on Headline PBIT 7.5 times 5.6 times
2003 2002
£m £m
Interest cover (excluding FRS17 interest) on Headline PBIT
Headline PBIT 533.5 480.2
Net interest payable and similar charges on net borrowings 60.1 79.6
Interest cover (excluding FRS17 interest) on Headline PBIT 8.9 times 6.0 times
Reconciliation of profit on ordinary activities before taxation
to PBT and headline earnings for the year ended 31 December 2003
2003 2002
£m £m
Profit on ordinary activities before taxation 349.9 205.4
Goodwill amortisation and impairment 112.0 177.7
Profits on disposal of fixed assets - (9.2)
Amounts written off fixed asset investments - 19.9
Net interest charges on defined benefit pension schemes 11.5 6.8
Headline PBT 473.4 400.6
Taxation on profit on ordinary activities (122.1) (103.4)
Minority interests (19.4) (14.0)
Headline earnings 331.9 283.2
Ordinary dividends 76.8 62.5
Dividend cover on headline earnings 4.3 times 4.5 times
WPP GROUP PLC
Segmental margin analysis
Reported margins by geographical area were as follows:
Headline PBIT
(1)
Revenue Margin (%)
£m £m
United Kingdom 664.9 71.8 10.8
United States 1,608.5 240.7 15.0
Continental Europe 1,079.4 121.8 11.3
Canada, Asia Pacific, Latin America, Africa & Middle East 753.2 99.2 13.2
4,106.0 533.5 13.0
Reported margins by operating sector were as follows:
Headline PBIT(1)
Revenue Margin (%)
£m £m
Advertising and Media investment management 1,935.8 295.5 15.3
Information, insight and consultancy 703.6 50.0 7.1
Public relations and public affairs 426.3 55.0 12.9
Branding and identity, Healthcare and Specialist 1,040.3 133.0 12.8
communications
4,106.0 533.5 13.0
Reported margins before and after income from associates were as follows:
Margin (%) 2003 Margin (%) 2002
£m £m
Revenue 4,106.0 3,908.3
Headline PBIT 13.0 533.5 12.3 480.2
Income from associates 40.5 30.0
Headline PBIT excluding income from
associates 12.0 493.0 11.5 450.2
(1)Headline 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
Reconciliation of free cash flow for the year ended 31 December 2003
2003 2002
£m £m
Operating profit 415.3 272.5
Add back:
Depreciation and amortisation, including impairment 205.2 294.3
Plus:
Dividends received from associates 15.6 9.4
Proceeds from the issue of shares 18.1 24.4
Proceeds from sale of tangible fixed assets 8.7 10.2
Proceeds from disposal of investments 11.0 3.3
Proceeds from disposal of interest in Zenith Optimedia Group 75.0 -
Less:
Purchase of tangible fixed assets (93.9) (100.5)
UK and overseas tax paid (93.6) (85.0)
Returns on investments and servicing of finance (38.3) (78.2)
Free Cash Flow 523.1 350.4
WPP GROUP PLC
GLOSSARY AND BASIS OF PREPARATION
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 year 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.
Constant currency
The Group uses US dollar-based, constant currency models to measure performance.
These are calculated by applying constant 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.
Free cash flow
Free cash flow is calculated as headline PBIT before equity income and
depreciation (including dividends received from associates, proceeds from the
issue of shares, and proceeds from disposal of tangible fixed assets and
investments), less tax paid, returns on investments and servicing of finance and
the purchase of tangible fixed assets.
Headline PBIT
Profit on ordinary activities before interest, taxation, goodwill amortisation
and impairment, fixed asset gains and write-downs.
Headline 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.
Headline earnings
Headline PBT less taxation on profit on ordinary activities and minority
interests.
Operating margin
Headline PBIT as a percentage of revenue.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
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