Interim Results Cont.

WPP Group PLC 20 August 2001 PART 2 Appendix I Unaudited consolidated interim results for the six months ended 30 June, 2001 Notes Six Six months months ended ended 30 June 30 June 2001 2000 +/(-) £m £m % Turnover (gross billings) 8,961.0 5,655.9 +58.4% Revenue 4 1,997.0 1,209.1 +65.2% Gross profit 1,889.5 1,071.1 +76.4% Operating costs: Operating costs excluding goodwill and exceptional items (1,627.9) (924.6) -76.1% Goodwill amortisation and impairment 8 (4.8) - - Exceptional operating charge - - - Total operating costs (1,632.7) (924.6) -76.6% Operating profit 256.8 146.5 +75.3% Income from associates 21.0 14.2 +47.9% Profit on ordinary activities before interest and taxation 277.8 160.7 +72.9% Net interest payable and similar charges (30.2) (23.0) -31.3% Profit on ordinary activities before taxation 247.6 137.7 +79.8% Tax on profit on ordinary activities 5 (74.3) (41.3) -79.9% Exceptional tax credit arising on exercised stock options - - - Profit on ordinary activities after 173.3 96.4 +79.8% taxation Minority interests (6.2) (3.3) -87.9% Profit attributable to ordinary share owners 167.1 93.1 +79.5% Ordinary dividends 6 (16.4) (9.3) +76.3% Retained profit for the period 150.7 83.8 +79.8% PBIT* 4 282.6 160.7 +75.9% PBIT* margin 14.2% 13.3% +0.9% Earnings per share Basic earnings per ordinary share 7 15.3p 12.3p +24.4% Diluted earnings per ordinary share 7 14.6p 12.0p +21.7% Ordinary dividend per share - interim 6 1.44p 1.2p +20.0% - final - - - Earnings per ADR** Basic earnings per ADR $1.10 $0.97 +13.4% Diluted earnings per ADR $1.05 $0.94 +11.7% Ordinary dividend per ADR** Interim 10.4c 9.4c +10.6% Final - - - Unaudited consolidated interim results for the six months ended 30 June, 2001 Continued Notes Constant Combined*** Year six months ended Currency ended 30 31 June December +/(-) 2000 2000 % £m £m (note 3) Turnover (gross billings) +51.9% n/a 13,949.4 Revenue 4 +58.6% 1,809.9 2,980.7 Gross profit +69.2% 1,671.9 2,736.1 Operating costs: Operating costs excluding goodwill and exceptional items -68.8% (1,448.7) (2,343.0) Goodwill amortisation and impairment 8 - - (15.1) Exceptional operating charge - (36.7) - Total operating costs -69.3% (1,485.4) (2,358.1) Operating profit +68.9% 186.5 378.0 Income from associates +51.3% 16.6 38.0 Profit on ordinary activities before interest and taxation +67.4% 203.1 416.0 Net interest payable and similar charges -24.4% (28.2) (50.3) Profit on ordinary activities before taxation +74.7% 174.9 365.7 Tax on profit on ordinary activities 5 -74.7% (70.2) (109.7) Exceptional tax credit arising on exercised stock options - 18.1 - Profit on ordinary activities after +74.7% 122.8 256.0 taxation Minority interests -87.9% (4.2) (11.3) Profit attributable to ordinary share owners +74.3% 118.6 244.7 Ordinary dividends 6 +76.3% (11.6) (37.8) Retained profit for the period +74.0% 107.0 206.9 PBIT* 4 +70.4% 239.8 431.1 PBIT* margin +1.0% 13.2% 14.4% Earnings per share Basic earnings per ordinary share 7 +20.5% 11.2p 29.3p Diluted earnings per ordinary share 7 +18.0% 10.6p 28.4p Ordinary dividend per share - interim 6 +20.0% n/a 1.2p - final - n/a 2.55p Earnings per ADR** Basic earnings per ADR +20.5% $0.88 $2.22 Diluted earnings per ADR +18.0% $0.83 $2.15 Ordinary dividend per ADR** Interim +20.0% n/a 9.4c Final - n/a 19.3c *PBIT: Profit on ordinary activities before interest and taxation, excluding goodwill charges and the operating exceptional charge recorded in the 30 June 2000 proforma combined figures. ** These figures have been translated for convenience purposes only, using the profit and loss exchange rate shown in note 3. *** These figures are the illustrative unaudited proforma WPP/Y&R combined financial information, as presented in WPP's 2000 interim report, the UK listing particulars and the US Form F-4 filed in respect of the merger with Y&R. WPP GROUP PLC Unaudited summary interim consolidated cash flow statement for the period ended 30 June, 2001 Six months Six months Year ended ended ended 30 June 30 June 2000 31 December 2001 2000 £m £m £m Reconciliation of operating profit to net cash (outflow)/inflow from operating activities: Operating profit 256.8 146.5 378.0 Depreciation, amortisation and impairment 58.7 24.8 78.9 charge Movements in working capital and (493.5) (309.0) 166.1 provisions Net cash (outflow)/inflow from operating (178.0) (137.7) 623.0 activities Dividends received from associates 5.0 3.2 7.6 Returns on investments and servicing of (30.5) (23.9) (64.6) finance United Kingdom and overseas tax paid (34.9) (31.5) (81.4) Purchase of tangible fixed assets (62.1) (29.9) (111.9) Purchase of own shares by ESOP Trust (69.7) (46.2) (94.1) Other movements 1.6 3.2 6.9 Capital expenditure and financial (130.2) (72.9) (199.1) investment Cash consideration for acquisitions (282.2) (97.8) (206.5) Less cash/(overdrafts) acquired 18.4 2.0 (33.6) Net purchases of other investments (5.2) (20.3) (40.9) Total acquisitions (269.0) (116.1) (281.0) Equity dividends paid - - (25.6) Net cash outflow before management of liquid resources and financing (637.6) (378.9) (21.1) Management of liquid resources (202.5) - - Financing (Decrease)/Increase in drawings on bank (262.1) 100.3 126.6 loans Eurobond issue proceeds 614.1 - - Proceeds from issue of shares 46.0 8.2 78.0 Net cash inflow from financing 398.0 108.5 204.6 (Decrease)/increase in cash and (442.1) (270.4) 183.5 overdrafts for the period Translation difference 8.8 8.0 35.1 Balance of cash and overdrafts at 770.0 551.4 551.4 beginning of period Balance of cash and overdrafts at end of 336.7 289.0 770.0 period Reconciliation of net cash flow to movement in net (debt) / funds: (Decrease)/increase in cash and (442.1) (270.4) 183.5 overdrafts for the period Cash outflow from increase in liquid 202.5 - - resources Cash inflow from debt financing (351.9) (100.3) (126.6) Debt acquired - - (194.9) Other movements (0.2) (0.8) (1.9) Translation difference (3.8) (12.4) 23.4 Movement of net (debt)/funds in the (595.5) (383.9) (116.5) period Net (debt) /funds at beginning of period (24.6) 91.9 91.9 Net debt at end of period (Note 11) (620.1) (292.0) (24.6) WPP GROUP PLC Unaudited consolidated balance sheet as at 30 June, 2001 30 June * 30 June 31 December Notes 2001 2000 2000 £m £m £m Fixed assets Intangible assets: Corporate brands 950.0 350.0 950.0 Goodwill 8 3,665.3 511.0 3,497.3 Tangible assets 421.6 211.1 390.2 Investments 8 638.9 448.9 551.5 5,675.8 1,521.0 5,389.0 Current assets Stocks and work in progress 332.5 198.1 241.1 Debtors 2,298.5 1,364.3 2,181.0 Debtors within working capital facility: Gross debts 422.4 396.3 464.9 Non-returnable proceeds (245.0) (228.1) (231.6) 177.4 168.2 233.3 Current asset investments 202.5 - - Cash at bank and in hand 581.1 395.9 1,067.6 3,592.0 2,126.5 3,723.0 Creditors: amounts falling due within one 9 (4,006.8) (2,404.2) (4,252.4) year Net current liabilities (414.8) (277.7) (529.4) Total assets less current liabilities 5,261.0 1,243.3 4,859.6 Creditors: amounts falling due after more than one year 10 (1,555.2) (754.9) (1,279.6) (including convertible loan note) Provisions for liabilities and charges (142.3) (75.7) (145.9) Net assets 3,563.5 412.7 3,434.1 Capital and reserves Share capital 113.8 77.9 111.2 Reserves 3,421.8 324.6 3,298.7 Share owners' funds 3,535.6 402.5 3,409.9 Minority interests 27.9 10.2 24.2 Total capital employed 3,563.5 412.7 3,434.1 * These figures have been restated as a result of the implementation of FRS19 in the Group's 2000 year end financial statements. WPP GROUP PLC Unaudited reconciliation of movements in consolidated share owners' funds for the period ended 30 June 2001 Six months * Six months Year ended ended ended 30 June 2001 30 June 2000 31 December 2000 £m £m £m Profit for the period 167.1 93.1 244.7 Ordinary dividends payable (16.4) (9.3) (37.8) 150.7 83.8 206.9 Exchange adjustments on foreign (62.9) (36.1) (133.0) currency net investments Shares issued for the acquisition of Y& - - 2,413.5 R Inc. Reserve for shares to be issued as a result of the acquisition of Y&R Inc. - - 547.3 Share issue costs charged to merger - - (35.0) reserve Other share issues 37.9 8.6 64.0 Net additions to share owners' funds 125.7 56.3 3,063.7 Opening share owners' funds 3,409.9 346.2 346.2 Closing share owners' funds 3,535.6 402.5 3,409.9 WPP GROUP PLC Unaudited statement of consolidated recognised gains and losses for the period ended 30 June, 2001 Six * Six months Year months ended ended ended 30 June 30 June 31 December 2000 2001 2000 £m £m £m Profit for the period 167.1 93.1 244.7 Exchange adjustments on foreign currency net (62.9) (36.1) (133.0) investments Prior year adjustment on implementation of - 28.0 28.0 FRS 19 (Deferred tax) Total recognised gains 104.2 85.0 139.7 * These figures have been restated as a result of the implementation of FRS19 in the Group's 2000 year end financial statements. The implementation did not impact the reported profit and loss account for the period ended 30 June 2000. Notes to the unaudited consolidated interim financial statements 1. Basis of accounting The unaudited consolidated interim financial statements are prepared under the historical cost convention. 2. Accounting policies The unaudited consolidated interim financial statements comply with relevant accounting standards and have been prepared using accounting policies set out on pages 56 and 57 of the Group's 2000 Annual Report and Accounts. The policies set out in the 2000 Annual Report and Accounts are in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). 3. Currency conversion The 2001 unaudited consolidated interim profit and loss account is prepared using, among other currencies, an average exchange rate of US$1.4397 to the pound (period ended 30 June, 2000: US$1.5700; year ended 31 December, 2000 US$1.5162). The unaudited consolidated interim balance sheet as at 30 June, 2001 has been prepared using the exchange rate on that day of US$1.4116 to the pound (period ended 30 June, 2000: US$1.5166; year ended 31 December, 2000: US$1.4937). The unaudited consolidated interim profit and loss account and balance sheet are presented in Euros in Appendix II for illustrative purposes. The unaudited consolidated interim profit and loss account has been prepared using an average exchange rate of Euro1.6042 to the pound (period ended 30 June, 2000: Euro1.6347; year ended 31 December 2000: Euro1.6428). The unaudited consolidated interim balance sheet at 30 June, 2001 has been prepared using the exchange rate on the day of Euro1.6659 to the pound (period ended 30 June, 2000: Euro1.5870; year ended 31 December, 2000: Euro1.5912). The constant currency percentage changes shown on the face of the profit and loss account have been calculated by applying 2001 exchange rates to the results for 2000 and 2001. 4. Segmental Analysis Reported contributions by geographical area were as follows: 30 June 30 June 31 December 2001 2000 2000 £m £m £m Revenue United Kingdom 300.4 234.9 532.4 United States 917.2 531.6 1,273.6 Continental Europe 412.3 218.7 586.3 Canada, Asia Pacific, Latin America, Africa & Middle East 367.1 223.9 588.4 1,997.0 1,209.1 2,980.7 PBIT1 before goodwill charges United Kingdom 38.7 28.1 66.9 United States 153.5 86.3 201.7 Continental Europe 47.3 28.1 82.9 Canada, Asia Pacific, Latin America, Africa & Middle East 43.1 18.2 79.6 282.6 160.7 431.1 Reported contributions by operating sector were as follows: 30 June 30 June 31 December 2001 2000 2000 £m £m £m Revenue Advertising and media investment management 914.0 556.6 1,399.0 Information and consultancy 281.9 239.5 512.1 Public relations and public affairs 264.5 121.7 330.1 Branding and identity, healthcare and specialist communications 536.6 291.3 739.5 1,997.0 1,209.1 2,980.7 PBIT(1) before goodwill charges Advertising and media investment management 156.6 84.5 231.4 Information and consultancy 26.8 22.5 51.6 Public relations and public affairs 28.7 18.7 43.2 Branding and identity, healthcare and specialist communications 70.5 35.0 104.9 282.6 160.7 431.1 (1) PBIT: Profit on ordinary activities before interest and taxation 5. Taxation The Group tax rate on profit on ordinary activities before taxation is 30% (30 June, 2000: 30%; year ended 31 December, 2000: 30%). The tax charge comprises: Six Six Year months months ended ended ended 30-Jun-01 30-Jun-00 31-Dec-00 £m £m £m Total current tax 65.9 38.2 106.7 Total deferred tax - - (10.6) Share of associates tax 8.4 3.1 13.6 Total tax on profits on ordinary activities 74.3 41.3 109.7 Tax on ordinary activities at standard UK corporation tax rate of 30% (2000: 30%) 68.0 37.1 98.3 Effects of: Utilisation of tax losses brought forward (2.0) - (9.7) Unused tax losses carried forward - - 9.4 Differences between UK and overseas statutory tax 5.7 1.1 12.8 rates Permanent differences between expenditures charged in arriving at income and expenditure allowed for tax (5.8) - (4.1) purposes Group current tax charge for the period 65.9 38.2 106.7 6. Interim dividend An interim dividend of 1.44p (2000:1.2p) per ordinary share has been declared by the Board. This is expected to be paid on 19 November 2001 to share owners on the register at 14 September 2001. 7. Earnings per share Basic and diluted earnings per share have been calculated in accordance with FRS 14 'Earnings per Share'. (a) Basic earnings per share have been calculated using earnings of £ 167.1 million (period ended 30 June, 2000: £93.1 million; year ended 31 December, 2000: £244.7 million) and weighted average shares in the issue during the six months to 30 June, 2001 of 1,095,532,290 shares (period ended 30 June, 2000: 757,499,254 shares; year ended 31 December, 2000: 834,280,801 shares). (b) Diluted earnings per share have been calculated using earnings of £167.1 million (period ended 30 June, 2000: £93.1 million; year ended 31 December, 2000: £244.7 million), as adjusted for income arising on the convertible loan note of £1.8 million (period ended 30 June 2000: £nil; year ended 31 December 2000: £0.9 million). The weighted average shares used was 1,157,794,496 shares (period ended 30 June 2000: 775,155,818 shares; year ended 31 December 2000: 865,978,000 shares). This takes into account the exercise of employee share options where these are expected to dilute earnings. (c) At 30 June, 2001 there were 1,138,157,418 ordinary shares in issue. 8. Goodwill Total goodwill of £217.2 million arising during the period includes £168.0 million in respect of acquisitions of subsidiary undertakings. In addition, investments include £49.2 million of goodwill in respect of associate undertakings acquired during the period. Cash paid in respect of these acquisitions was £282.2 million (30 June, 2000: £97.8 million and 31 December, 2000: £206.5 million). Future anticipated payments to vendors totalled £254.3 million (30 June, 2000: £179.5 million; 31 December, 2000: £302.3 million), based on the directors' best estimates of future obligations, which are dependent on future performance of the interests acquired. These acquisitions do not have a significant impact on the Group's results for the six months to 30 June 2001. During the period, the Group charged £4.8 million (30 June, 2000: £nil and 31 December 2000: £6.6 million) to operating profits for goodwill amortisation, as goodwill arising on certain acquisitions is now being amortised over periods up to 20 years as a result of the Group's reassessment of the useful economic life of goodwill. During the year ended 31 December 2000 £8.5 million was also charged to operating profits, arising from the impairment of goodwill during the year due to the adjustment of the carrying value of goodwill to its recoverable amount. 9. Creditors: amounts falling due within one year The following are included in creditors falling due within one year: 30 June 30 June 31 December 2001 2000 2000 £m £m £m Bank loans and overdrafts 316.4 230.8 297.6 Trade creditors 2,361.3 1,416.7 2,574.9 Corporate income tax payable 74.1 37.8 42.4 Deferred income 266.2 137.5 267.6 Payments due to vendors (note 8) 70.6 52.6 94.1 Other creditors and accruals 918.2 528.8 975.8 4,006.8 2,404.2 4,252.4 Overdraft balances included within bank loans and overdrafts amount to £244.4 million (30 June, 2000: £106.9 million; 31 December, 2000: £297.6 million). 10. Creditors: amounts falling due after more than one year The following are included in creditors falling due after more than one year: 30 June 30 June 31 December 2001 2000 2000 £m £m £m Corporate bonds, convertible loan note and bank loans 1,087.3 457.1 794.6 Corporate income taxes payable 217.8 125.9 212.5 Payments due to vendors (note 8) 183.7 126.9 208.2 Other creditors and accruals 66.4 45.0 64.3 1,555.2 754.9 1,279.6 The corporate bonds, convertible loan note, bank loans and overdrafts included within short and long term creditors fall due for repayment as follows: 30 June 30 June 31 December 2001 2000 2000 £m £m £m Within one year 316.4 230.8 297.6 Between 1 and 2 years 74.9 - - Between 2 and 5 years 553.8 261.0 727.7 Over 5 years 458.6 196.1 66.9 1,403.7 687.9 1,092.2 11. Net debt 30 June 30 June 31 December 2001 2000 2000 £m £m £m Cash at bank and in hand 581.1 395.9 1,067.6 Current asset investments 202.5 - - Bank loans and overdrafts due within one year (note 9) (316.4) (230.8) (297.6) Corporate bond and loans due after one year (note (1,087.3) (457.1) (794.6) 10) Net debt (620.1) (292.0) (24.6) During the period, the Group completed an issue of bonds, issuing Euro350 million at 5.125% Notes due 2004 and Euro650 million at 6.00% Notes due 2008. Net proceeds of the offering were used to reduce drawings on existing loan facilities. 12. Statutory information and audit review The results for the six months to 30 June, 2001 and 2000 do not constitute statutory accounts. The statutory accounts for the year ended 31 December, 2000 received an unqualified auditors' report and have been filed with the Registrar of Companies. The interim financial statements are unaudited but have been reviewed by the auditors and their report to the directors is set out below. INDEPENDENT REVIEW REPORT TO WPP GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2001 which comprises the Consolidated Profit and Loss Account, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Total Recognised Gains and Losses and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reason for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999 /4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2001. Arthur Andersen Chartered Accountants London August 2001 WPP GROUP PLC Appendix II Preliminary results for the six months ended 30 June, 2001 Unaudited preliminary consolidated profit & loss account for the six months ended 30 June, 2001 Presented in Euros for illustrative purposes only Six months Six months Year ended ended ended 30 June 30 June 31 December 2001 2000 2000 Euro m Euro m Euro m Turnover (gross billings) 14,375.2 9,245.7 22,916.1 Revenue 3,203.6 1,976.5 4,896.7 Gross profit 3,031.1 1,750.9 4,494.9 Operating costs: Operating costs excluding goodwill and (2,611.4) (1,511.4) (3,849.1) exceptional items Goodwill amortisation and impairment (7.7) - (24.8) Total operating costs (2,619.1) (1,511.4) (3,873.9) Operating profit 412.0 239.5 621.0 Income from associates 33.7 23.2 62.4 Profit on ordinary activities before interest and taxation 445.7 262.7 683.4 Net interest payable and similar charges (48.5) (37.6) (82.6) Profit on ordinary activities before 397.2 225.1 600.8 taxation Tax on profit on ordinary activities (119.2) (67.5) (180.2) Profit on ordinary activities after 278.0 157.6 420.6 taxation Minority interests (9.9) (5.4) (18.6) Profit attributable to ordinary share 268.1 152.2 402.0 owners Ordinary dividends (26.3) (15.2) (62.1) Retained profit for the period 241.8 137.0 339.9 Earnings per share (net basis) Basic earnings per ordinary share 24.5c 20.1c 48.1c Fully diluted earnings per ordinary share 23.4c - 46.7c Ordinary dividend per share - interim 2.31c 1.96c 1.97c - final - - 4.19c WPP GROUP PLC Unaudited consolidated balance sheet as at 30 June, 2001 Presented in Euros for illustrative purposes only 30 June * 30 June 31 December 2001 2000 2000 Euro m Euro m Euro m Fixed assets Intangible assets: Corporate brands 1,582.6 555.5 1,511.6 Goodwill 6,106.0 811.0 5,565.0 Tangible assets 702.3 335.0 620.9 Investments 1,064.3 712.3 877.5 9,455.2 2,413.8 8,575.0 Current assets Stocks and work in progress 553.9 314.4 383.6 Debtors 3,829.1 2,165.2 3,470.4 Debtors within working capital facility: Gross debts 703.7 628.9 739.7 Non-returnable proceeds (408.1) (362.0) (368.5) 295.6 266.9 371.2 Current asset investments 337.3 - - Cash at bank and in hand 968.1 628.3 1,698.8 5,984.0 3,374.8 5,924.0 Creditors: amounts falling due within one (6,674.9) (3,815.5) (6,766.4) year Net current liabilities (690.9) (440.7) (842.4) Total assets less current liabilities 8,764.3 1,973.1 7,732.6 Creditors: amounts falling due after more (2,590.8) (1,198.0) (2,036.1) than one year (including convertible loan note) Provisions for liabilities and charges (237.1) (120.1) (232.2) Net assets 5,936.4 655.0 5,464.3 Capital and reserves Share capital 189.6 123.6 176.9 Reserves 5,700.4 515.2 5,248.9 Share owners' funds 5,890.0 638.8 5,425.8 Minority interests 46.4 16.2 38.5 Total capital employed 5,936.4 655.0 5,464.3 * These figures have been restated as a result of the implementation of FRS19 in the Group's 2000 year end financial statements.

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