Interim Results - Part 3
WPP GROUP PLC
16 August 1999
PART 3
WPP GROUP PLC
Unaudited reconciliation of movements in consolidated share
owners' funds for the period ended 30 June 1999
Six months Six months Year
ended ended ended
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Profit for the period 75.3 61.6 140.3
Ordinary dividends
payable (7.8) (6.2) (19.6)
------------------------------------------
67.5 55.4 120.7
Exchange adjustments
on foreign currency
net investments (33.4) (4.1) 4.0
Share buybacks - (17.1) (21.3)
Shares issued for
acquisitions - - 105.4
Other movements 4.8 3.0 4.1
-----------------------------------------
Net additions to
share owners funds 38.9 37.2 212.9
Opening share
owners funds 187.7 (25.2) (25.2)
------------------------------------------
Closing share
owners funds 226.6 12.0 187.7
-----------------------------------------
Unaudited statement of consolidated recognised gains and losses
for the period ended 30 June, 1999
Six months Six months Year
ended ended ended
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Profit for the period 75.3 61.6 140.3
Exchange adjustments
on foreign currency
net investments (33.4) (4.1) 4.0
----------------------------------------
Total recognised gains 41.9 57.5 144.3
----------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial
statements
1. Basis of accounting
The consolidated interim financial statements are prepared
under the historical cost convention.
2. Accounting policies
The consolidated interim financial statements comply with
relevant accounting standards and have been prepared using
accounting policies set out on pages 52 and 53 of the Group's
1998 Annual Report and Accounts, apart from the adoption of
FRS 12 (Provisions and Contingencies) and FRS 13 (Derivatives
and Other Financial Instruments). There has been no material
impact on the financial statements as a result of the adoption
of these new standards.
The policies set out in the 1998 Annual Report and Accounts
are in accordance with accounting principles generally
accepted in the United Kingdom (UK GAAP).
3. Currency conversion
The 1999 unaudited interim consolidated profit and loss
account is prepared using, among other currencies, an average
exchange rate of US$1.6197 to the pound (period ended 30 June,
1998: US$1.65; year ended 31 December, 1998: US$1.6574). The
balance sheet as at 30 June, 1999 has been prepared using the
exchange rate on that day of US$1.5763 to the pound (30 June,
1998: US$1.6685; 31 December, 1998: US$1.6638).
The constant currency percentage changes shown on the face of
the profit and loss account have been calculated by applying
1999 exchange rates to the results for 1998 and 1999.
The unaudited preliminary consolidated profit and loss account
and balance sheet are presented in Euros in Appendix II for
illustrative purposes. The unaudited interim consolidated
profit and loss account is prepared using an average exchange
rate of Euro1.5372 to the pound (period ended 30 June, 1998:
Euro1.5070; year ended 31 December 1998: Euro1.4771). The balance
sheet as at 30 June, 1999 has been prepared using the exchange
rate on the day of Euro1.5285 to the pound (30 June, 1998:
Euro1.5197; 31 December, 1998: Euro1.4169).
4. Segmental Analysis
Reported contributions by geographical area were as follows:
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Revenue
United Kingdom 212.0 187.3 393.5
United States 432.4 369.4 764.4
Continental Europe 199.1 174.8 396.0
Canada, Asia Pacific,
Latin America, Africa
& Middle East 173.8 168.5 364.5
----------------------------
1,017.3 900.0 1,918.4
============================
PBIT1
United Kingdom 25.2 20.9 42.2
United States 68.0 55.8 111.6
Continental Europe 25.0 24.5 55.0
Canada, Asia Pacific,
Latin America, Africa
& Middle East 10.7 7.3 36.4
----------------------------
128.9 108.5 245.2
============================
Reported contributions by operating sector were as follows:
30 June 30 June31 December
1999 1998 1998
£m £m £m
Revenue
Advertising ,
media planning,
buying and research 477.2 450.5 951.3
Information and consultancy 191.9 163.2 367.2
Public relations and public
affairs 82.8 64.7 134.8
Branding and identity,
healthcare and
specialist communications 265.4 221.6 465.1
---------------------------
1,017.3 900.0 1,918.4
============================
PBIT1
Advertising, media planning,
buying and research 69.2 63.2 141.3
Information and consultancy 18.0 15.3 39.3
Public relations and public
affairs 11.6 8.1 15.7
Branding and identity,
healthcare and
specialist communications 30.1 21.9 48.9
------------------------------
128.9 108.5 245.2
=============================
1 PBIT: Profit on ordinary activities before interest and
taxation
5. Taxation
The Group tax rate on profit on ordinary activities before
taxation is 31% (30 June, 1998: 32%; year ended 31 December,
1998: 31.5%). The tax charge relates mainly to overseas
operations, except for £5.1 million in respect of UK
corporation tax and £4.3 million in respect of associated
companies.
6. Interim dividend
An interim dividend of 1.0p (1998: 0.84p net) per ordinary
share has been declared by the Board. This is expected to be
paid on 20 November 1999 to share owners on the register at 22
October 1999. No advance corporation tax is payable in
respect of the interim dividend owing to the abolition of ACT
with effect from April 1999.
7. Earnings per share
Basic and fully diluted earnings per share have been
calculated in accordance with FRS14 'Earnings per share', and
the prior year comparatives have been restated accordingly.
(a) Basic earnings per share have been calculated using
earnings of £75.3 million (30 June, 1998: £61.6 million; year
ended 31 December, 1998: £140.3 million) and weighted average
shares in issue during the six months to 30 June, 1999 of
752,798,633 shares (30 June, 1998: 729,757,040 shares; year
ended 31 December, 1998: 735,700,122 shares).
(b) Fully diluted earnings per share have been calculated on
a weighted average of 768,181,423 shares (30 June, 1998:
737,407,317 shares; year ended 31 December, 1998:
746,939,733 shares). This takes into account the exercise
of employee share options where these are expected to
dilute earnings.
(c) At 30 June, 1999 there were 769,574,125 ordinary shares
in issue.
8. Net movement on goodwill
Total goodwill of £58.5 million arising during the period
includes £46.1 million in respect of the acquisition of
subsidiary undertakings. In addition, investments include
£12.4 million of goodwill in respect of associate
undertakings. Cash paid in respect of these acquisitions was
£57.3 million. Future anticipated payments to vendors
totalled £97.2 million (30 June, 1998: £52.7 million; 31
December, 1998: £97.9 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
Groups results for the six months to 30 June 1999.
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
1999 1998 1998
£m £m £m
Bank loans and overdrafts 105.9 57.2 95.4
Trade creditors 1,160.5 1,033.5 1,102.4
Corporate income tax payable 58.7 38.8 50.0
Deferred income 103.6 86.3 111.1
Payments due to vendors
(note 8) 6.1 6.6 14.3
Other creditors and
accruals 411.8 348.4 404.1
-------- -------- -------
1,846.6 1,570.8 1,777.3
======== ======== =======
Overdraft balances included within bank loans and overdrafts
amount to £105.9 million (30 June, 1998: £48.1 million; 31
December, 1998 : £95.4 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
1999 1998 1998
£m £m £m
Corporate bond and bank loans 249.2 189.9 194.2
Corporate income taxes payable 99.2 78.5 91.3
Payments due to vendors (note 8) 91.1 46.1 83.6
Other creditors and accruals 29.1 31.2 32.4
------ ------- -------
468.6 345.7 401.5
====== ======= =======
11. Net (debt) / funds
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Cash at bank and in hand 302.7 221.9 423.9
Bank loans and overdrafts due
within one year (105.9) (57.2) (95.4)
(note 9)
Corporate bond and loans
due after one year (note 10) (249.2) (189.9) (194.2)
------- -------- -------
Net (debt) / funds (52.4) (25.2) 134.3
======= ======== =====
12. Year 2000 compliance
As referred to in the Groups 1998 annual report, WPP has now
substantially completed a Group-wide programme of work
designed to achieve its Year 2000 compliance objectives by 30
June 1999. The cost of this work is still estimated to be in
the region of $20 million being expended between 1997 and
2000. Year 2000 compliance of most of the Groups IT systems
and products was achieved by the target date. The remediation
of the remaining non-compliant IT systems or products is
planned to be completed before the end of September 1999. The
Group will continue to monitor the Year 2000 compliance of its
business critical suppliers and clients. The Groups Year
2000 compliance programme and its associated contingency plans
are designed to minimise the disruption to the business of WPP
arising from the millennium date change. However, there can
be no guarantee that every possible cause of business
disruption will be avoided, especially where due to events
outside the control of the Group.
13. Statutory information and audit review
The results for the six months to 30 June, 1999 and 1998 do
not constitute statutory accounts. The statutory accounts for
the year ended 31 December, 1998 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 set out on pages 11 to 19 and 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 Listing Rules of the London
Stock Exchange 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. 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 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 1999.
Arthur Andersen
Chartered Accountants
London
16 August 1999
WPP GROUP PLC
Appendix II
Preliminary results for the six months ended 30 June, 1999
Unaudited preliminary consolidated profit & loss account for
the six months ended 30 June, 1999
Presented in Euros for illustrative purposes only
Six months Six months Year
ended ended ended
30 June 30 June 31 December
1999 1998 1998
Euro m Euro m Euro m
Turnover (gross billings) 6,833.0 5,790.1 11,817.0
--------------------------------------
Revenue 1,563.8 1,356.3 2,833.7
--------------------------------------
Gross profit 1,323.8 1,160.4 2,411.4
Operating costs (1,138.4) (1,004.1) (2,073.0)
--------------------------------------
Operating profit 185.4 156.3 338.4
--------------------------------------
Income from associates 12.7 7.2 23.8
Profit on ordinary
activities before interest
and taxation 198.1 163.5 362.2
--------------------------------------
Net interest payable
and similar charges (25.0) (22.1) (47.9)
Profit on ordinary
activities before taxation 173.1 141.4 314.3
-------------------------------------
Tax on profit on ordinary
activities (53.6) (45.2) (98.9)
Profit on ordinary
activities after taxation 119.5 96.2 215.4
--------------------------------------
Minority interests (3.7) (3.3) (8.1)
--------------------------------------
Profit attributable
to ordinary share owners 115.8 92.9 207.3
Ordinary dividends (12.0) (9.3) (29.0)
Retained profit for
the period 103.8 83.6 178.3
=====================================
Earnings per share
(net basis)
Basic earnings per
ordinary share 15.4c 12.7c 28.2c
--------------------------------------
Ordinary dividend
per share - interim 1.54c 1.27c 1.24c
- final - - 2.54c
======================================
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet as at 30 June, 1999
Presented in Euros for illustrative purposes only
30 June 1999 30 June 1998 31 December 1998
Euro m Euro m Euro m
Fixed assets
Intangible assets:
Corporate brands 535.0 531.9 495.9
Goodwill 312.0 120.7 223.9
Tangible assets 272.2 221.3 236.2
Investments 444.3 111.4 380.0
-----------------------------------------
1,563.5 985.3 1,336.0
Current assets
Stocks and work
in progress 214.3 189.7 152.0
Debtors 1,617.2 1,394.9 1,265.4
Debtors within
working capital facility:
Gross debts 498.3 457.1 417.3
Non-returnable proceeds (335.5) (317.3) (296.4)
162.8 139.8 120.9
Cash at bank and in hand 462.7 337.2 600.6
-----------------------------------------
2,457.0 2,061.6 2,138.9
Creditors: amounts
falling due within
one year (2,822.5) (2,387.1) (2,518.3)
-----------------------------------------
Net current liabilities (365.5) (325.5) (379.4)
Total assets less current----------------------------------------
liabilities 1,198.0 659.8 956.6
Creditors: amounts falling
due after more than
one year (716.3) (525.4) (568.9)
Provisions for liabilities
and charges (122.3) (103.8) (110.4)
----------------------------------------
Net assets 359.4 30.6 277.3
----------------------------------------
Capital and reserves
Share capital 117.7 111.7 108.5
Reserves 228.7 (93.4) 157.4
--------------------------------------
Share owners funds 346.4 18.3 265.9
Minority interests 13.0 12.3 11.4
---------------------------------------
Total capital employed 359.4 30.6 277.3
=======================================
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