Interim Results - Part Two.
WPP Group PLC
14 August 2000
PART TWO
Appendix I
Unaudited consolidation interim results for
the six months ended 30 June, 2000
Six months Six months Year Ended
ended ended Constant 31
30 June 30 June Currency December
2000 1999 +/(-) +/(-) 1999
Notes £m £m % % £m
(note 3)
Turnover
(gross billings) 5,655.9 4,445.1 +27.2% +26.2% 9,345.9
Revenue 4 1,209.1 1,017.3 +18.9% +17.9% 2,172.6
Gross profit 1,071.1 861.2 +24.4% +23.5% 1,855.3
Operating costs (924.6) (740.6)-24.8% -23.8% (1,591.8)
Operating profit 146.5 120.6 +21.5% +21.8% 263.5
Income from associates 14.2 8.3 +71.1% +76.7% 27.3
Profit on ordinary
activities before
interest and taxation 160.7 128.9 +24.7% +25.3% 290.8
Net interest payable
and similar charges (23.0) (16.3)-41.1% -39.0% (35.4)
Profit on ordinary
activities before
taxation 137.7 112.6 +22.3% +23.2% 255.4
Tax on profit on
ordinary activities 5 (41.3) (34.9)-18.3% -19.2% (76.6)
Profit on ordinary
activities after
taxation 96.4 77.7 +24.1% +25.0% 178.8
Minority interests (3.3) (2.4) -37.5% -37.5% (6.0)
Profit attributable to
ordinary share owners 93.1 75.3 +23.6% +24.6% 172.8
Ordinary dividends 6 (9.3) (7.8) +19.2% +21.3% (24.0)
Retained profit for
the period 83.8 67.5 +24.1% +25.0% 148.8
PBIT margin* 13.3% 12.7% +0.6% +0.7% 13.4%
Earnings per share
Basic earnings per
ordinary share 7 12.3p 10.0p +23.0% 23.8% 22.9p
Diluted earnings
per ordinary share 7 12.0p 9.8p +22.4% +23.5% 22.5p
Ordinary dividend
per share
- interim 6 1.2p 1.0p +20.0% +20.0% 1.0p
- final - - - - 2.1p
Earnings per ADR**
Basic earnings per ADR $0.97 $0.81 +19.8% +19.8% $1.85
Diluted earnings per ADR $0.94 $0.79 +19.0% +19.0% $1.82
Ordinary dividend per ADR**
Interim 9.4c 8.1c +16.0% +16.0% 8.1c
Final - - - - 17.0c
*PBIT: Profit on ordinary activities before interest
and taxation.
**These figures have been translated for convenience
purposes only, using the profit and loss exchange rate
shown in note 3. The comparative figures have been restated
following a change in the ratio of ordinary shares per ADR
from 10 ordinary shares per ADR to 5 ordinary shares per ADR.
WPP GROUP PLC
Unaudited summary interim consolidated cash flow
statement for the period ended 30 June, 2000
Six months Six months Year ended
ended ended 31
30 June 30 June December
2000 1999 1999
£m £m £m
Reconciliation of
operating profit to net
cash (outflow)/inflow from
operating activities:
Operating profit 146.5 120.6 263.5
Depreciation charge 24.8 19.7 42.2
Movements in working
capital and provisions (309.0) (202.9) 42.8
Net cash (outflow)/inflow
from operating activities (137.7) (62.6) 348.5
Dividends received
from associates 3.2 1.8 4.3
Returns on investments
and servicing of finance (23.9) (13.9) (37.1)
United Kingdom and
overseas tax paid (31.5) (31.6) (58.4)
Purchase of tangible
fixed assets (29.9) (22.1) (64.6)
Purchase of own shares
by ESOP Trust (46.2) (4.1) (17.9)
Other movements 3.2 1.6 2.0
Capital expenditure and
financial investment (72.9) (24.6) (80.5)
Cash consideration
for acquisitions (97.8) (57.3) (242.2)
Less cash acquired 2.0 3.3 51.8
Net purchase of
other investments (20.3) - (11.8)
Total acquisitions (116.1) (54.0) (202.2)
Equity dividends paid - - (21.1)
Net cash outflow
before financing (378.9) (184.9) (46.5)
Increase in drawings
on bank loans 100.3 42.3 258.0
Proceeds from issue of shares 8.2 4.0 12.0
Net cash inflow from financing 108.5 46.3 270.0
(Decrease)/increase in cash
and overdrafts for the period (270.4) (138.6) 223.5
Translation difference 8.0 6.8 (0.6)
Balance of cash and
overdrafts at beginning
of period 551.4 328.5 328.5
Balance of cash and
overdrafts at end of period 289.0 196.7 551.4
Reconciliation of net cash
flow to movement in net
(debt)/funds:
(Decrease)/increase in cash
and overdrafts for the period (270.4) (138.6) 223.5
Cash inflow from
debt financing (100.3) (42.3) (258.0)
Other movements (0.8) (0.7) (1.7)
Translation difference (12.4) (5.1) (6.2)
Movement of net funds in
the period (383.9) (186.7) (42.4)
Net funds at beginning
of period 91.9 134.3 134.3
Net (debt)/funds at end
of period (Note11) (292.0) (52.4) 91.9
WPP GROUP PLC
Unaudited consolidated balance sheet as at 30 June, 2000
30 June 30 June 31 December
Notes 2000 1999 1999
£m £m £m
Fixed assets
Intangible assets:
Corporate brands 350.0 350.0 350.0
Goodwill 8 511.0 204.1 410.3
Tangible assets 211.1 178.1 196.7
Investments 8 448.9 290.7 356.9
1,521.0 1,022.9 1,313.9
Current assets
Stocks and work in
progress 198.1 140.2 113.5
Debtors 1,336.3 1,058.0 1,040.4
Debtors within working
capital facility:
Gross debts 396.3 326.0 345.7
Non-returnable proceeds (228.1) (219.5) (214.1)
168.2 106.5 131.6
Cash at bank and in hand 395.9 302.7 607.0
2,098.5 1,607.4 1,892.5
Creditors:
amounts falling due
within one year 9 (2,404.2) (1,846.6) (2,148.0)
Net current liabilities (305.7) (239.2) (255.5)
Total assets less
current liabilities 1,215.3 783.7 1,058.4
Creditors:
amounts falling due
after more than
one year 10 (754.9) (468.6) (652.5)
Provisions for
liabilities and charges (75.7) (80.0) (79.2)
Net assets 384.7 235.1 326.7
Capital and reserves
Share capital 77.9 77.0 77.5
Reserves 296.6 149.6 240.7
Share owners' funds 374.5 226.6 318.2
Minority interests 10.2 8.5 8.5
Total capital employed 384.7 235.1 326.7
WPP GROUP PLC
Unaudited reconciliation of movements in consolidated
share owners' funds for the period ended 30 June 2000
Six months Six months Year ended
ended ended 31
30 June 2000 30 June 1999 December 1999
£m £m £m
Profit for the period 93.1 75.3 172.8
Ordinary dividends
payable (9.3) (7.8) (24.0)
83.8 67.5 148.8
Exchange adjustments on
foreign currency net
investments (36.1) (33.4) (31.2)
Other movements 8.6 4.8 12.9
Net additions to share
owners' funds 56.3 38.9 130.5
Opening shareowners' funds 318.2 187.7 187.7
Closing shareowners' funds 374.5 226.6 318.2
Unaudited statement of consolidated recognised
gains and losses for the period ended 30 June, 2000
Six months Six months Year ended
ended ended 31
30 June 2000 30 June 1999 December1999
£m £m £m
Profit for the period 93.1 75.3 172.8
Exchange adjustments
on foreign currency
net investments (36.1) (33.4) (31.2)
Total recognised gains 57.0 41.9 141.6
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 56 and 57
of the Group's 1999 Annual Report and Accounts.
The policies set out in the 1999 Annual Report and Accounts
are in accordance with accounting principles generally
accepted in the United Kingdom (UK GAAP).
3. Currency conversion
The 2000 unaudited interim consolidated profit and loss
account is prepared using, among other currencies, an average
exchange rate of US$ 1.5700 to the pound (period ended 30
June, 1999: US$1.6197; yearended 31 December,1999
US$1.6178). The balance sheet as at 30 June, 2000 has been
prepared using the exchange rate on that day of US$ 1.5166 to
the pound (30 June, 1999: US$1.5763; 31 December,1999:
US$1.6182).
The constant currency percentage changes shown on the face of
the profit and loss account have been calculated by applying
2000 exchange rates to the results for 1999 and 2000.
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 euro1.6347 to the pound (period ended 30 June, 1999:
euro1.5372; year ended 31 December 1999: euro1.5202).
The balance sheet as at 30 June, 2000 has been prepared using
the exchange rate on the day of euro 1.5870 to the pound
(30 June,1999: euro1.5285; 31 December,1999: euro1.6056).
WPP GROUP PLC
Notes to the unaudited interim
financial statements (continued)
4. Segmental Analysis
Reported contributions by geographical area were as follows:
30 June 30 June 31 December
2000 1999 1999
£m £m £m
Revenue
United Kingdom 234.9 212.0 434.7
United States 531.6 432.4 915.2
Continental Europe 218.7 199.1 426.2
Canada, Asia Pacific,
Latin America, Africa
& Middle East 223.9 173.8 396.5
------- ------- -------
1,209.1 1,017.3 2,172.6
======= ======= =======
PBIT1
United Kingdom 28.1 25.2 51.5
United States 86.3 68.0 139.0
Continental Europe 28.1 25.0 55.8
Canada, Asia Pacific,
Latin America, Africa
& Middle East 18.2 10.7 44.5
------ ----- -----
160.7 128.9 290.8
====== ===== =====
Reported contributions by operating sector were as follows:
30 June 30 June 31 December
2000 1999 1999
£m £m £m
Revenue
Advertising,
media investment management 556.6 477.2 1,013.1
Information and consultancy 239.5 191.9 419.7
Public relations and
public affairs 121.7 82.8 178.9
Branding and identity,
healthcare and specialist
communications 291.3 265.4 560.9
------- ------ ------
1,209.1 1,017.3 2,172.6
======= ======= =======
PBIT1
Advertising, media
investment management 84.5 69.2 155.9
Information and consultancy 22.5 18.0 42.1
Public relations and
public affairs 18.7 11.6 23.9
Branding and identity,
healthcare and specialist
communications 35.0 30.1 68.9
----- ------ ------
160.7 128.9 290.8
====== ====== ======
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, 1999: 31%; year ended
31 December,1999: 30%). The tax charge relates mainly
to overseas operations, except for £5.8 million in respect
of UK corporation tax and £3.1 million in respect
of associated companies.
6. Interim dividend
An interim dividend of 1.2p (1999: 1.0p) per ordinary share
has been declared by the Board. This is expected to be paid
on 20 November 2000 to share owners on the register at 15
September 2000.
7. Earnings per share
(a) Basic earnings per share have been calculated using
earnings of £93.1 million (30 June, 1999: £75.3 million
; year ended 31 December, 1999: £172.8 million) and
weighted average shares in issue during the six months
to 30 June, 2000 of 757,499,254 shares (30 June, 1999:
752,798,633 shares; year ended 31 December,
1999: 753,324,054 shares).
(b) Diluted earnings per share have been calculated using
earnings of £93.1 million (30 June,1999: £75.3 million;
year ended 31 December,1999: £172.8 million) on a
weighted average of 775,155,818 shares (30 June,1999:
768,181,423 shares; year ended 31 December, 1999:
768,691,993 shares). This takes into account the
exercise of employee share options where these
are expected to dilute earnings.
(c) At 30 June, 2000 there were 778,921,600 ordinary shares
in issue.
8. Goodwill
Total goodwill of £117.4 million arising during the period
includes £100.7 million in respect of acquisitions of
subsidiary undertakings. In addition, investments include
£16.7 million of goodwill in respect of associate
undertakings acquired during the period.
Cash paid in respect of these acquisitions was £97.8 million
(30 June 1999: £57.3 million and 31 December, 1999: £242.2
million). Future anticipated payments to vendors totalled
£179.5 million (30 June, 1999: £97.2 million; 31 December,
1999: £172.4 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 2000.
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
2000 1999 1999
£m £m £m
Bank loans and overdrafts 230.8 105.9 148.3
Trade creditors 1,416.7 1,160.5 1,315.0
Corporate income
tax payable 37.8 58.7 34.6
Deferred income 137.5 103.6 125.8
Payments due to
vendors (note 8) 52.6 6.1 41.2
Other creditors and
accruals 528.8 411.8 483.1
------- ------- --------
2,404.2 1,846.6 2,148.0
======= ======= =========
Overdraft balances included within bank loans and
overdrafts amount to £106.9 million (30 June,1999:
£105.9 million; 31 December,1999: £55.6 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
2000 1999 1999
£m £m £m
Corporate bond and
bank loans 457.1 249.2 366.8
Corporate income
taxes payable 125.9 99.2 122.9
Payments due to
vendors (note 8) 126.9 91.1 131.2
Other creditors
and accruals 45.0 29.1 31.6
------ ------ ------
754.9 468.6 652.5
====== ====== ======
The corporate bond, bank loans and overdrafts included
within short and long term creditors fall due for
repayment as follows:
30 June 30 June 31 December
2000 1999 1999
£m £m £m
Within one year 230.8 105.9 148.3
Between 1 and 2 years - - -
Between 2 and 5 years 261.0 60.8 183.1
Over 5 years 196.1 188.4 183.7
------ ------ ------
687.9 355.1 515.1
====== ====== ======
11. Net (debt)/funds
30 June 30 June 31 December
2000 1999 1999
£m £m £m
Cash at bank and in hand 395.9 302.7 607.0
Bank loans and overdrafts
due within one year (230.8) (105.9) (148.3)
(note 9)
Corporate bond and
loans due after one year
(note 10) (457.1) (249.2) (366.8)
------- ------- --------
Net (debt)/funds (292.0) (52.4) 91.9
======= ======= ========
12. Post balance sheet event
Since 30 June 2000, the Group has entered into a further
Revolving Credit Facility for US$700 million. This facility
has a 364 day maturity. Under this agreement the Group has
the ability to draw funds for a period of up to 3 years from
the date of the agreement. This facility is subject to share
owners' approval.
Borrowings under the Revolving Credit Facility are governed
by certain financial covenants based on the results and
financial position of the Group.
13. Statutory information and audit review
The results for the six months to 30 June, 2000 and 1999 do
not constitute statutory accounts. The statutory accounts for
the year ended 31 December, 1999 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 20 andwe 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 responsiblefor
preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority and applicable
United Kingdom accounting standards. The Listing Rules
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 in the United Kingdom by the
Auditing Practices Board and with our profession's ethical
guidance. 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 2000.
Arthur Andersen
Chartered Accountants
London
14 August 2000
WPP GROUP PLC
Appendix II
Preliminary results for the six months ended 30 June, 2000
Unaudited preliminary consolidated profit & loss account
for the six months ended 30 June, 2000
Presented in Euros for illustrative purposes only
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2000 1999 1999
Euro m Euro m Euro m
Turnover (gross billings) 9,245.7 6,833.0 14,207.6
Revenue 1,976.5 1,563.8 3,302.8
Gross profit 1,750.9 1,323.8 2,820.4
Operating costs (1,511.4) (1,138.4) (2,419.8)
Operating profit 239.5 185.4 400.6
Income from associates 23.2 12.7 41.5
Profit on ordinary
activities before
interest and taxation 262.7 198.1 442.1
Net interest payable
and similar charges (37.6) (25.0) (53.8)
Profit on ordinary
activities before
taxation 225.1 173.1 388.3
Tax on profit on
ordinary activities (67.5) (53.6) (116.5)
Profit on ordinary
activities after taxation 157.6 119.5 271.8
Minority interests (5.4) (3.7) (9.1)
Profit attributable to
ordinary share owners 152.2 115.8 262.7
Ordinary dividends (15.2) (12.0) (36.5)
Retained profit
for the period 137.0 103.8 226.2
Earnings per share
(net basis)
Basic earnings per
ordinary share 20.1c 15.4c 34.8c
Ordinary dividend
per share - interim 1.96c 1.54c 1.52c
- final - - 3.19c
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet as
at 30 June, 2000
Presented in Euros for illustrative purposes only
30 June 30 June 31 December
2000 1999 1999
Euro m Euro m Euro m
Fixed assets
Intangible assets:
Corporate brands 555.5 535.0 561.9
Goodwill 811.0 312.0 658.8
Tangible assets 335.0 272.2 315.8
Investments 712.3 444.3 573.0
2,413.8 1,563.5 2,109.5
Current assets
Stocks and work
in progress 314.4 214.3 182.2
Debtors 2,120.7 1,617.2 1,670.5
Debtors within working
capital facility:
Gross debts 628.9 498.3 555.1
Non-returnable proceeds (362.0) (335.5) (343.8)
266.9 162.8 211.3
Cash at bank and in hand 628.3 462.7 974.6
3,330.3 2,457.0 3,038.6
Creditors: amounts falling
due within one year (3,815.5) (2,822.5) (3,448.8)
Net current liabilities (485.2) (365.5) (410.2)
Total assets less current
liabilities 1,928.6 1,198.0 1,699.3
Creditors: amounts falling
due after more
than one year (1,198.0) (716.3) (1,047.7)
Provisions for
liabilities and charges (120.1) (122.3) (127.2)
Net assets 610.5 359.4 524.4
Capital and reserves
Share capital 123.6 117.7 124.4
Reserves 470.7 228.7 386.4
Share owners' funds 594.3 346.4 510.8
Minority interests 16.2 13.0 13.6
Total capital employed 610.5 359.4 524.4
Appendix III
Illustrative unaudited Pro Forma WPP/Y&R consolidated
Financial Information
Six months ended Six months ended
30 June 1999 30 June 1999
WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
£M £M £M £M £M £M
Revenue 1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
Gross profit 1,071.1 600.8 1,671.9 861.2 492.8 1,354.0
Operating
costs (924.6) (524.1)(1,448.7) (740.6)(436.1)(1,176.7)
Operating
profit
pre exceptional
charge 146.5 76.7 223.2 120.6 56.7 177.3
Exceptional
operating
charge - (36.7) (36.7) - - -
Operating
profit 146.5 40.0 186.5 120.6 56.7 177.3
Income from
associates 14.2 2.4 16.6 8.3 2.3 10.6
Profit on
ordinary
activities
before 160.7 42.4 203.1 128.9 59.0 187.9
interest and taxation
Profit on
ordinary
activities
before 160.7 79.1 239.8 128.9 59.0 187.9
interest, tax and exceptional charge
Net interest
payable
and similar (23.0) (5.2) (28.2) (16.3) (2.7) (19.0)
charges
Profit on
ordinary
activities
before 137.7 37.2 174.9 112.6 56.3 168.9
taxation
Tax on
profit
on ordinary
activities (41.3) (28.9) (70.2) (34.9) (21.1) (56.0)
Exceptional
tax credit
arising on - 18.1 18.1 - 12.8 12.8
exercised stock options
Profit on
ordinary
activities
after
taxation 96.4 26.4 122.8 77.7 48.0 125.7
Minority
interests (3.3) (0.9) (4.2) (2.4) (0.2) (2.6)
Profit
attributable
to ordinary
share
owners 93.1 25.5 118.6 75.3 47.8 123.1
Ordinary
dividends (9.3) (2.3) (11.6) (7.8) (1.1) (8.9)
Retained
profit
for the
period 83.8 23.2 107.0 67.5 46.7 114.2
PBIT*
margin 13.3% 13.2% 13.2% 12.7% 12.0% 12.4%
Earnings
per share
Diluted
earnings
per ordinary
share 12.0p n/a 10.6p 9.8p n/a 11.1p
Diluted
earnings
per ordinary
share pre
exceptional
items 12.0p n/a 12.2p 9.8p n/a 9.9p
* PBIT: Profit on ordinary activities before interest and
taxation, excluding exceptional operating charge.
Notes to the Unaudited Pro Forma Financial Information
1. Unaudited pro forma Financial Information of the
enlarged WPP Group plc
The following unaudited pro forma profit and loss account
for the six months 30 June 1999 and 2000 (the 'Unaudited
pro forma Financial Information') for WPP Group plc have
been prepared for illustrative purposes only to
show the effects of the combination with Y&R as if it had
occurred at 1 January 1999 for the six months ended 30 June
1999 and 1 January 2000 for the six months ended 30 June
2000. Because of its nature, the Unaudited pro forma
Financial Information may not give a true picture of the
financial position of WPP Group plc. It has been repared
in accordance with the Listing Rules.
The financial information for Y&R for the six months
ended 30 June 1999 and 2000 is based on the unaudited
results extracted from Y&R's form 10-Q filed with the SEC
on 3 August 2000, prepared in accordance with US GAAP
adjusted to reflect WPP's accounting policies under UK GAAP
2. Reclassifications
Reclassifications have been made to Y&R's historical
financial information presented under US GAAP to conform
to WPP's presentation and disclosed accounting policies
under UK GAAP. None of these reclassifications impact
net profit.
The reclassifications that impacts the profit and
loss account is:
Equity accounting
In accordance with UK GAAP, the investor's share of
operating profit or loss of associated undertakings and
joint ventures is shown separately on the face of the profit
and loss account and the investor's share of the taxation
charge of associated undertakings and joint ventures is
included within the taxation charge shown in The profit and
loss account. Under US GAAP, net after-tax profits
Or losses are included in the income statement as a single
line item.
3. US to UK GAAP adjustments
Accounting principles generally accepted in the UK differ in
certain material respects from those generally accepted in
the US. The differences which are material to restating the
historical consolidated financial information of Y&R to
conform to WPP's disclosed accounting policies under UK GAAP
are set out below.
(a) Goodwill
In accordance with UK GAAP and FRS 10 'Goodwill and
Intangible Assets,' goodwill resulting from acquisitions made
by Y&R on or after 1 January 1998 has been capitalised as an
intangible asset. Under WPP's disclosed accounting policy
this goodwill has an indefinite life and as a result no
amortisation has been provided. Under UK GAAP, goodwill
assumed to have an indefinitelife is subject to an annual
impairment review in accordance with FRS 11 'Impairment of
Fixed Assets and Goodwill'.
Under US GAAP, goodwill resulting from a business combination
accounted for as a purchase is amortised over its estimated
useful life, not to exceed 40 years. Additionally, Y&R's
management evaluates the carrying value of Y&R's tangible and
intangible assets each year, or whenever events or
circumstances indicate that these assets may be impaired.
Intangible assets are determined to be impaired if the future
anticipated undiscounted cash flows arising from the use of
the intangible assets are less than their carrying value. If
an impairment is deemed to have occurred, the asset is
written down to its fair value. The impact of this
adjustment is to increase operating profit by $10.9m (£6.9m).
(b) Non-operating items
For the six months to 30 June 2000 in accordance with
US GAAP, Y&R recognised gains largely relating to the sale
of certain assets and rights known as Y&R TeamSpace in
exchange for an ownership interest in eMotion Inc. and
otreceived from Luminant. Under UK
GAAP, these gains would be included in the statement of total
recognised gains and losses which has not been separately
presented. The impact of this adjustment is to reduce profit
on ordinary activities by $12.2m (£7.8m).
(c) Deferred taxes
Under UK GAAP, deferred tax assets are accounted for only
to the extent that it is considered probable that a liability
or asset will crystallise in the foreseeable future. Under US
GAAP, deferred taxes are accounted for on all timing differ-
ences and a valuation allowance is established in respect
of those deferred tax assets where it is more likely than
not that some portion will remain unrealised. This reduces
the tax charge in the profit and loss account by $28.4m
(£18.1m) under UK GAAP.
(d) Treasury Stock
Under UK GAAP, if repurchased Treasury stock is used for the
purpose of satisfying the Company's obligation upon exercise
of stock options issued to employees, the Company should
record as an operating cost, the excess of the cost of re-
purchasing the treasury stock over the proceeds received
from employees on exercising stock options. Under US GAAP,
this is recorded as a reduction in equity. For the six
months ended 30 June 2000, under UK GAAP, this results in a
charge of $57.6 (£36.7m) million which has been reflected as
an operating exceptional item within this restatement. For
prior years, the difference between the proceeds on exercise
of employee share options less the cost of satisfying these
options is not material.
4. Segmental Information
The tables below present unaudited pro forma segment infor-
mation, including Y&R segments presented to conform with the
segments as reported by WPP and to UK GAAP. 'PBIT' means
profit on ordinary activities before interest and taxation,
excluding exceptional operating charge.
Information by Discipline
Revenue by Discipline - Pound Sterling Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
Advertising &
Media 556.6 274.3 830.9 477.2 232.7 709.9
Investment
Management
Information & 239.5 - 239.5 191.9 - 191.9
Consultancy
Public 121.7 125.4 247.1 82.8 95.3 178.1
Relations &
Public Affairs
Branding & 291.3 201.1 492.4 265.4 164.8 430.2
Identity,
Healthcare &
Specialist-
Communications
1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
PBIT* by Discipline - Pound Sterling
Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
Advertising & 84.5 43.7 128.2 69.2 30.0 99.2
Media
Investment
Management
Information & 22.5 - 22.5 18.0 - 18.0
Consultancy
Public 18.7 17.4 36.1 11.6 8.6 20.2
Relations &
Public Affairs
Branding & 35.0 18.0 53.0 30.1 20.4 50.5
Identity,
Healthcare &
Specialist-
Communications
160.7 79.1 239.8 128.9 59.0 187.9
* PBIT: Profit on ordinary activities before interest
and taxation, excluding exceptional operating charge.
Revenue by Discipline - U.S. Dollar
Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
Advertising & 873.8 430.7 1,304.5 773.0 377.0 1,150.0
Media
Investment
Management
Information & 376.0 - 376.0 310.8 - 310.8
Consultancy
Public 191.1 196.9 388.0 134.1 154.3 288.4
Relations &
Public Affairs
Branding & 457.3 315.7 773.0 429.8 266.9 696.7
Identity,
Healthcare &
Specialist-
Communications
1,898.2 943.3 2,841.5 1,647.7 798.2 2,445.9
PBIT* by Discipline U.S. dollar Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
Advertising & 132.8 68.7 201.5 112.1 48.6 160.7
Media
Investment
Management
Information & 35.3 - 35.3 29.1 - 29.1
Consultancy
Public 29.3 27.4 56.7 18.7 14.0 32.7
Relations &
Public Affairs
Branding & 54.9 28.2 83.1 48.9 33.0 81.9
Identity,
Healthcare &
Specialist-
Communications
252.3 124.3 376.6 208.8 95.6 304.4
* PBIT: Profit on ordinary activities before interest and
taxation, excluding exceptional operating charge.
Information by Geography
Revenue by Geography - Pound Sterling
Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
North America 553.6 331.2 884.8 452.1 276.5 728.6
UK 234.9 55.1 290.0 212.0 45.3 257.3
Continental
Europe 218.7 134.9 353.6 199.1 125.3 324.4
Asia Pacific, 201.9 79.6 281.5 154.1 45.7 199.8
Latin America,
Africa &
Middle East
1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
PBIT* by Geography - Pound Sterling
Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
North America 88.1 55.6 143.7 70.3 47.2 117.5
UK 28.1 -0.2 27.9 25.2 1.0 26.2
Continental
Europe 28.1 16.7 44.8 25.0 9.5 34.5
Asia Pacific, 16.4 7.0 23.4 8.4 1.3 9.7
Latin America,
Africa &
Middle East
160.7 79.1 239.8 128.9 59.0 187.9
* PBIT: Profit on ordinary activities before interest and
taxation, excluding exceptional operating charge.
Revenue by Geography - U.S. Dollar
Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
North America 869.2 520.1 1,389.3 732.2 447.8 1,180.0
UK 368.7 86.5 455.2 343.4 73.4 416.8
Continental
Europe 343.3 211.8 555.1 322.5 202.9 525.4
Asia Pacific, 317.0 124.9 441.9 249.6 74.1 323.7
Latin America,
Africa &
Middle East
1,898.2 943.3 2,841.5 1,647.7 798.2 2,445.9
PBIT* by Geography - U.S. Dollar Information
Six months ended Six months ended
30 June 2000 30 June 1999
£m WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
North America 138.3 87.4 225.7 113.9 76.4 190.3
UK 44.2 -0.3 43.9 40.8 1.7 42.5
Continental 44.1 26.2 70.3 40.5 15.4 55.9
Europe
Asia Pacific, 25.7 11.0 36.7 13.6 2.1 15.7
Latin America,
Africa &
Middle East
252.3 124.3 376.6 208.8 95.6 304.4
* PBIT: Profit on ordinary activities before interest
and taxation, excluding exceptional operating charge.
5. Translation of unaudited pro forma financial information
Solely for convenience, the unaudited pro forma information is
shown in both pounds sterling and US dollars using the approx-
imate average rate for the periods for the profit and loss
account (2000: $1.57 = £1,1999: $1.6197 = £1).
6. Diluted earnings
The number is shares used in the calculation of unaudited pro
forma earnings per share are based on the average weighted
number of WPP shares during the respective periods aggregated
with the weighted average number of Y&R shares during the
respective period, multiplied by 4.175 to reflect the
exchange ratio.
Diluted earnings per share takes into account the exercise of
WPP employee share options where these are expected to be
diluted, aggregated with the number of Y&R options expected to
dilute, multiplied by 4.175 to reflect the exchange rate into
WPP new shares. The 30 June 2000 calculation also includes
the dilutive impact of the Y&R convertible loan stock.
Diluted number of shares (million)
Six months ended Six months ended
30 June 2000 30 June 1999
WPP Y&R Pro WPP Y&R Pro
forma forma
Weighted average 775.2 86.4 n/a 768.2 82.0 n/a
Multiplication n/a 4.175 n/a n/a 4.175 n/a
factor
Weighted average,
new WPP shares 775.2 360.7 1,135.9 768.2 342.4 1,110.6
Unaudited pro forma diluted earnings per share have been
calculated using unaudited pro forma earnings of £120.1m
(1999: £123.1m) which includes £1.5m in respect of the Y&R
convertible loan stock in 2000 (1999: nil).
Unaudited pro forma diluted earnings per share pre except-
ional items has been calculated using earnings of £138.7m
(1999: £110.3m) which reflect the removal of the Y&R except-
ional operating charge in respect of Treasury Stock and the
Y&R exceptional tax credits arising on the exercise of
stock options.
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