WPP 2005 Preliminary Results in Accordance With IFRS.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of & LONDON London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. -- WPP WPP Wire & Plastic Product PLC WPP World Press Photo WPP Web Presence Provider WPP Wolf Pack Productions (anime fan subbing group) WPP Witness Protection Program WPP Wireless Packet Platform WPP Work Package Planning (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : WPPGY): --Billings up over 36% to $48.6 billion (GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 26.7 billion) --Revenue up 25% to $9.8 billion (GBP 5.4 billion) --Like-for-like revenue up 5.5% --Operating margin up 1.0 margin points to 14.0% --Headline profits before tax up over 36% to $1,216.8 million (GBP 669.0 million) --Profits before tax up over 36% to $1,018.9 million (GBP 592.0 million) crossing $1 billion for the first time --Diluted headline earnings Headline Earnings A basis for measuring earnings per share implemented by the Institute of Investment Management and Research. This method accounts for all the profits and losses from operational, trading, and interest activities, that have been discontinued or acquired at any per share up 29% at 65.5 cents (36.0p) --Final dividend up 20% to 11.53 cents (6.34p) per share WPP (NASDAQ: WPPGY) today reported its 2005 Preliminary Results. --Billings up over 36% to $48.6 billion (GBP 26.7 billion). --Revenue up 25% to $9.775 billion (GBP 5.374 billion). --Like-for-like revenue up 5.5%. --Headline operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. before interest and tax up almost 35% to $1,372.9 million (GBP 754.8 million) from $1,018.9 million (GBP 560.2 million). --Operating margin up 1.0 margin points to 14.0% from 13.0%. --Headline profits before tax up over 36% to $1,216.8 million (GBP 669.0 million) from $890.5 million (GBP 489.6 million). --Profit before tax up over 36% to $1,076.8 million (GBP 592.0 million) from $790.1 million (GBP 434.4 million). --Diluted headline earnings per share up 29% to 65.5 cents (36.0p) from 50.7 cents (27.9p). --Reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of up almost 27% to 54.0 cents (29.7p) from 42.6 cents (23.4p). --Final dividend up 20% to 11.53 cents (6.34p) per share making a total for the year of 16.99 cents (9.34p) up 20% over 2004. --Headline operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: targets revised upwards to 14.5% from 14.2% in 2006 and to 15.0% from 14.7% in 2007. --Average net debt up $222 million (GBP 129 million) to $2,083 million (GBP 1,212 million) from $1,861 million (GBP 1,083 million), despite the gross cash payment for Grey of $720 million (GBP 376 million). --Estimated net new billings Billings, city (1990 pop. 81,151), seat of Yellowstone co., S Mont., on the Yellowstone River, in a valley surrounded by seven mountain ranges; inc. as a city 1885. of over $5.2 billion (GBP 2.8 billion). The Group's preliminary results have been prepared under International Financial Reporting Standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). ("IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System ") which were adopted with effect from 1 January January: see month. 2004, with the exception of IAS See iPlanet Application Server. 1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle. 39 'Financial Instruments: Recognition and Measurement' and IAS 32 'Financial Instruments: Disclosure and Presentation'. As a result of continued amendments to IAS 39 the Group decided not to implement this standard for statutory reporting from 1 January 2004. As a result the Group has taken advantage of the option in IFRS 1 'First-time adoption of International Reporting Standards' to implement IAS 39, together with IAS 32, from 1 January 2005 without restating its 2004 income statement and balance sheet. References to 2004 UK GAAP UK GAAP United Kingdom Generally Accepted Accounting Principles relate to UK Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting extant ex·tant adj. 1. Still in existence; not destroyed, lost, or extinct: extant manuscripts. 2. Archaic Standing out; projecting. in respect of 2004 - the basis of preparation of the Group's consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the year ended 31 December December: see month. 2004, as previously reported, prior to the implementation of IFRS. In this press release not all of the figures and ratios used are readily available from the unaudited preliminary results included in Appendix appendix, small, worm-shaped blind tube, about 3 in. (7.6 cm) long and 1-4 in. to 1 in. (.64–2.54 cm) thick, projecting from the cecum (part of the large intestine) on the right side of the lower abdominal cavity. I. Where required, details of how these have been arrived at are shown in the Appendix. Summary of results The Board of WPP Group WPP Group plc (LSE: WPP) (NASDAQ: WPPGY), based in London, United Kingdom, is one of the world's largest communications services groups (and one of the big six advertising holding companies, the others being Omnicom, Interpublic, Publicis, Dentsu and Havas) employing plc ("WPP") announces the unaudited preliminary results for the year ended 31 December 2005, the Group's twentieth year. These record results reflect the continued steady strength of the world economy positively impacting almost all disciplines and geographies, and, in addition, include the results of Grey Global Group ("Grey") with effect from 7 March 2005, which has performed particularly well and made a strong contribution to the Group's results. Billings were up over 36% at $48.517 billion (GBP 26.674 billion). Reportable revenue was up 25% to $9.775 billion (GBP 5.374 billion). Revenue including 100% of associates is estimated to total over $11.8 billion (GBP 6.5 billion). On a constant currency basis, revenue was up almost 23% and gross profit up almost 24%. Like-for-like revenues, excluding the impact of acquisitions and on a constant currency basis, were up 5.5%. Like-for-like revenues were up 6% in the first half of 2005 and up 5% in the second half, continuing the strong organic growth of almost 6% in the second half of 2004. Reported operating costs operating costs npl → gastos mpl operacionales including direct costs (but excluding goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. , amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. of acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and profits on disposal of fixed asset investments), rose by over 23% and by over 21% in constant currency. Like-for-like total operating and direct costs rose over 4%. Reported staff costs, excluding incentives (which includes the cost of share-based compensation), were up over 26%. Incentive payments (including the cost of share-based compensation) totalled $414.0 million (GBP 227.6 million) ($344.7 million (GBP 189.5 million) in 2004), an increase of over 20%, which represents 24.0% (26.3% in 2004) of operating profit before bonuses, taxes and income from associates. Before these incentive payments, operating margins increased by 0.9 margin points to 18.3% from 17.4%. On a reported basis, the Group's staff cost to gross margin ratio was flat with last year at 62.1%. Part of the Group's strategy is to continue to increase variable staff costs as a proportion of total staff costs and revenue, as this provides flexibility to deal with volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in revenues. In the 1990's, variable staff costs as a proportion of total staff costs increased, reaching a peak of 12.1% in 2000. The impact of the recession in 2001 and 2002 was to reduce this ratio to 9.2% and variable staff costs as a proportion of revenue to 5.3% (calculated under 2004 UK GAAP). In 2004, following the significant improvement in pre-bonus operating profit and incentives, variable staff costs as a proportion of staff costs increased further. There was a slight deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in 2005, with the ratio declining by 0.4 percentage points, to 12.8% (under IFRS - which includes 1.0 percentage points attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to share-based compensation). The number of people in the Group averaged 70,936 against 57,788 in 2004, an increase of 22.8%. On a like-for-like basis, average headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. was up to 70,936 from 67,439, an increase of 5.2%. At the end of 2005, staff numbers were 74,631 compared with 71,624 at the end of 2004 on a like-for-like basis, an increase of 4.2%. Net interest payable and similar charges was $172.2 million (GBP 94.7 million) up from $128.4 million (GBP 70.6 million) last year, an increase of $43.8 million (GBP 24.1 million), largely reflecting additional charges under IFRS of $41.3 million (GBP 22.7 million), relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the treatment of convertible bonds and revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of financial instruments (2004 - nil). The remaining increase of $2.5 million (GBP 1.4 million) reflects higher interest rates, offset by the impact of improved liquidity as a result of a reduction in working capital. Headline operating profit or profit pre-goodwill impairment, amortisation of acquired intangibles, interest, tax and investment gains and write-downs was up almost 35% to $1,372.9 million (GBP 754.8 million) from $1,018.9 million (GBP 560.2 million) and up over 31% in constant currencies. Reported profit before interest and tax was up 36% to $1,249.0 million (GBP 686.7 million) from $918.5 million (GBP 505.0 million) and up over 32% in constant currencies. Headline profit before tax or profit pre-goodwill impairment, amortisation of acquired intangibles, investment gains and write-downs, revaluation of financial instruments and tax was up over 36% to $1,216.8 million (GBP 669.0 million) from $890.5 million (GBP 489.6 million) and up over 32% in constant currencies. Reported headline operating margin (including income from associates) increased a full margin point to a record 14.0% from 13.0%, ahead of the revised target set in August 2005 of 13.7%. Our target at the beginning of 2005 was 13.2%. The margin achieved in 2005 is equivalent to an operating margin of 15.0% under 2004 UK GAAP, which surpasses the previous record operating margin of 14.5% in 2000. Reported profit before tax rose by 36.3% to $1,076.8 million (GBP 592.0 million), well over $1 billion, for the first time and up almost 32% in constant currencies. Diluted earnings per share rose by almost 27% to 54.0 cents (29.7p) and up over 22% in constant currencies. The Group's tax rate on headline profits was 29%, an increase of 1.4 percentage points over 2004, reflecting the continuing positive impact of the Group's tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. initiatives, more than offset by the impact of Grey, which had a tax rate on acquisition in excess of 45%. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. headline earnings per share were up 29% at 65.5 cents (36.0p). In constant currency, earnings per share on the same basis were up over 25%. The Board recommends an increase of 20% in the final dividend to 11.53 cents (6.34p) per share, making a total of 16.99 cents (9.34p) per share for 2005, a 20% increase over 2004. The record date for this dividend is 2 June June: see month. 2006, payable on 3 July July: see month. 2006. The dividend for 2005 is over four times covered by headline earnings. Further details of WPP's financial performance are provided in Appendix I. Reconciliation to 2004 UK GAAP The preliminary results for 2005 have been set out under IFRS. Note 19 of Appendix I reconciles IFRS to 2004 UK GAAP. The principal reasons for the differences in headline operating profits, operating margins, headline profits before tax and diluted headline earnings per share are twofold. Firstly, share-based payments, of $58.9 million (GBP 32.4 million), largely reflecting the cost of options on a fully-retrospective basis, with an impact on operating margins of 0.6 margin points. Secondly, accounting for associates, which reflects the deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of tax from income from associates, previously included in taxation, amounting to $36.6 million (GBP 20.1 million) and impacting operating margins by 0.4 margin points. Review of operations The Group's financial performance in the year more than mirrored the continuing steady strength in economic conditions across the globe, with even the weakest region, Western Continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. , picking up in the second half. 2005, the softest year of the quadrennial quad·ren·ni·al adj. 1. Happening once in four years. 2. Lasting for four years. quad·ren  ni·al n. 2005-2008 cycle, was
surprisingly strong. With no special political or sporting events to
speak of, 2005 reflected the steady growth seen throughout the world,
with three geographical ge·o·graph·ic also ge·o·graph·i·caladj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge speeds - fastest in Asia Pacific, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , Africa, the Middle East and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. ; a steady speed in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; and slower speed in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). . 2005 also marked continued client focus on top-line growth, as corporate profitability, margins and liquidity continued to improve significantly. Corporate profitability remains at historically high levels on both sides of the Atlantic. This resulted in unprecedented levels of new business activity, which have continued into 2006. Network television price inflation and declining audiences, fragmentation (1) Storing data in non-contiguous areas on disk. As files are updated, new data are stored in available free space, which may not be contiguous. Fragmented files cause extra head movement, slowing disk accesses. A defragger program is used to rewrite and reorder all the files. of traditional media and rapid development of new technologies continued to drive experimentation by our clients in new media and non-traditional alternatives. 1998 was really the first year when WPP's marketing services activities represented over 50% of Group revenue. In 2004 these activities represented almost 54% of Group revenue. In 2005, they represented 52%, as media investment management was again the fastest growing part of our business, following major success in winning media planning and buying consolidations, and the first time inclusion of Grey Worldwide and MediaCom Mediacom Communications (NASDAQ: MCCC; usually called just Mediacom) is a cable television and communications provider in the United States. Originally founded as an analog network in 1995, Mediacom is currently the 8th largest cable company in the United States. . In addition, in 2005, our narrowly defined internet-related revenue was almost $500 million or over 5% of our worldwide reported revenue. This is in line with 4 - 5% for on-line media's share of total advertising spend in the United States and approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 4% share worldwide. The new media continue to build their share of client spending. Revenue and operating profit by region The pattern of revenue growth differed regionally. The table below gives details of revenue and revenue growth (on a constant currency basis including the impact of acquisitions) by region for 2005 as well as proportions of operating profits:
Operating Like-for-Like
Revenue Revenue profit Revenue growth
as a% of growth% +/(-) as a % of % +/(-)
Region Total Group 05/04 Total Group 05/04
-------------- ----------- ------------- ----------- --------------
North America 39.0 25.9 46.1 5.8
United Kingdom 15.3 10.9 11.4 1.9
Continental
Europe 26.6 23.0 23.7 2.9
Asia Pacific,
Latin
America,
Africa & the
Middle East 19.1 27.4 18.8 11.9
----------- ------------- ----------- --------------
Total Group 100.0 22.9 100.0 5.5
----------- ------------- ----------- --------------
On a constant currency basis all regions showed double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" revenue growth, with the Group at almost 23%. Like-for-like growth was 5.5%. The United States continues to grow, with like-for-like growth of almost 6%, up slightly on the first half. Latin America remains the fastest growing region A growing region is an area suited by climate and soil conditions to the cultivation of a certain type of crop. Most crops are cultivated not in one place only, but in several distinct regions in diverse parts of the world. , as it was in 2004. Asia Pacific remains strong across the region, with China and India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. leading the way, with like-for-like growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. of 23% and almost 15%, an acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of the growth seen in the first half. Western Continental Europe, although relatively more difficult, improved slightly in the second half. The United Kingdom was softer in the latter part of the year, reflecting weakness in the economy. As seen in the first half, rates of growth in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). continue to be two-paced, with Western Continental Europe
remaining softer and Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. , Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). and the CIS
countries There are two lists concerning CIS countries:
The term used to describe a commodities market where the prices generally rise with ease when there are considerable signals of strength. Notes: These types of markets can be very volatile as the prices are rapid to rise and fall with investor sentiment. . Estimated net new billings of $5.2 billion (GBP 2.8 billion) were won last year, reflecting in part strong media investment management new business. Revenue and operating profit by communications services sector and brand The pattern of revenue growth also varied by communications services sector and brand. The table below gives details of revenue and revenue growth by communications services sector for 2005 (on a constant currency basis including the impact of acquisitions) as well as proportions of operating profits:
Operating Like-for-Like
services Revenue Revenue profit Revenue growth
Communications as a % of growth% +/(-) as a % of % +/(-)
services Total Group 05/04 Total Group 05/04
-------------- ----------- ------------- ----------- --------------
Advertising,
Media
Investment
Management 48.4 28.6 53.1 4.3
Information,
Insight &
Consultancy 15.1 7.3 11.0 6.4
Public
Relations &
Public Affairs 10.0 18.7 10.0 7.5
Branding &
Identity,
Healthcare &
Specialist
Communications 26.5 24.7 25.9 6.4
------- -------------- ----------- --------------
Total Group 100.0 22.9 100.0 5.5
------- -------------- ----------- --------------
Media investment management continues to show the strongest growth of all our communications services sectors, along with direct, internet and interactive and healthcare communications. Direct, internet and interactive related activities now account for over 15% of the Group's revenues, which are running at the rate of over $10 billion per annum Per annum Yearly. . Brand advertising, particularly in the new faster growing markets, along with information, insight & consultancy and branding & identity, healthcare and specialist communications, show consistent growth. Public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most and public affairs Those public information, command information, and community relations activities directed toward both the external and internal publics with interest in the Department of Defense. Also called PA. See also command information; community relations; public information. also continues to show significant improvement over last year, following a strong year in 2004. Media investment management and information, insight & consultancy combined, grew by almost 10% in the year. Advertising and Media Investment Management In constant currencies, advertising and media investment management revenue grew by almost 29%. Like-for-like revenue growth was well over 4%. The combined operating margin of this sector was over 15%. In 2005, Ogilvy Ogilvy may refer to:
American clergyman and writer. He and his son Cotton (1663-1728) exerted great theological and political influence on the colony of Massachusetts through their staunch Puritanism and prolific writing. Worldwide generated estimated net new billings of $161 million (GBP 87 million), JWT JWT J. Walter Thompson (agency) JWT Java Windows Terminal JWT Just War Theory JWT Jim Wolf Technology JWT Java Workflow Tooling JWT John Wayne Trail (US Army Yakima Training Center) JWT Justified War Theory $216 million (GBP 117 million), Y&R Advertising $280 million (GBP 152 million) and Grey Worldwide $735 million (GBP 398 million). Also in 2005, MindShare, Mediaedge:cia and MediaCom generated estimated net new billings of $2.9 billion (GBP 1.6 billion). Information, Insight and Consultancy On a constant currency basis information, insight and consultancy revenues grew over 7%, with like-for-like revenues up over 6%. Overall margins improved by 1.1 margin points to over 10%. Strong performances were recorded by Millward Brown Millward Brown is a market research company,[2] with its headquarters based in the UK. Millward Brown was the first company to provide continuous tracking studies, and has researched more ads and more brands than any other research company. (Greenfield Greenfield, town (1990 pop. 18,666), seat of Franklin co., NW Mass., at the confluence of the Deerfield and Green rivers, near their junction with the Connecticut; settled 1686, set off from Deerfield and inc. 1753. Consulting Group, MaPs and Dynamic Logic in the United States, France, Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , Poland Poland, Pol. Polska, officially Republic of Poland, republic (2005 est. pop. 38,635,000), 120,725 sq mi (312,677 sq km), central Europe. It borders on Germany in the west, on the Baltic Sea and the Kaliningrad region of Russia in the north, on Lithuania, , Centrum centrum /cen·trum/ (sen´trum) pl. cen´tra [L.] 1. a center. 2. the body of a vertebra. cen·trum n. pl. cen·trums or cen·tra 1. in the Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. , Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan , Singapore Singapore (sĭng`gəpôr, sĭng`ə–, sĭng'gəpôr`), officially Republic of Singapore, republic (2005 est. pop. 4,426,000), 240 sq mi (625 sq km). , Firefly firefly or lightning bug, small, luminescent, carnivorous beetle of the family Lampyridae. Fireflies are well represented in temperate regions, although the majority of species are tropical and subtropical. in Thailand Thailand (tī`lănd, –lənd), Thai Prathet Thai [land of the free], officially Kingdom of Thailand, constitutional monarchy (2005 est. pop. 65,444,000), 198,455 sq mi (514,000 sq km), Southeast Asia. , the Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. , Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. ); BMRB BMRB Biological Magnetic Resonance Data Bank BMRB British Market Research Bureau BMRB Boston Municipal Research Bureau BMRB Behavioral Medicine Research Building International in the United Kingdom, KMR KMR Kitten Milk Replacement KMR Kwajalein Missile Range (US Army; now Reagan Test Site) KMR Koninklijke Marine Reserve (Dutch) KMR Knowledge Management for Remedy (KMXperts) Group, Research International (in the United States, France, the Netherlands, Spain, SIFO in Sweden Sweden, Swed. Sverige, officially Kingdom of Sweden, constitutional monarchy (2005 est. pop. 9,002,000), 173,648 sq mi (449,750 sq km), N Europe, occupying the eastern part of the Scandinavian peninsula. and Norway Norway, Nor. Norge, officially Kingdom of Norway, constitutional monarchy (2005 est. pop. 4,593,000), 125,181 sq mi (324,219 sq km), N Europe, occupying the western part of the Scandinavian peninsula. , South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. , Brazil, Hong Kong, Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. ); Center Partners and Ziment in the United States, IMRB IMRB Indian Market Research Bureau IMRB Improved Main Rotor Blade IMRB Insensitive Munitions Review Board IMRB Independent Motorized Rifle Battalion in India, Lightspeed Research in the United States and Asia, Da Vinci da Vinci Surgery A surgical robot for performing certain surgeries–eg, mitral valve repair and laparoscopic procedures–eg, cholecystectomy and gastric ulcer repair. See Laparoscopic surgery, Robotics, Surgical robot. in the United States, Added Value/icon in the United Kingdom, Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , Spain, Japan and India. Public Relations and Public Affairs Public relations and public affairs continued its recovery with constant currency growth of almost 19% and like-for-like growth of well over 7%. Particularly strong were Cohn & Wolfe, Ogilvy Public Relations Worldwide, Hill & Knowlton Knowlton may refer to Places
Operating margins continued to improve and are now at 14%, an improvement of over 0.8 margin points. Branding and Identity, Healthcare and Specialist Communications The Group's branding and identity, healthcare and specialist communications revenues rose by over almost 25%. Like-for-like revenues rose by over 6%. Operating margins were up 1.2 margin points. The Group's healthcare and direct, internet and interactive businesses showed particularly strong revenue growth. Several companies performed particularly well: --in branding and identity - Landor Associates Landor Associates is a San Francisco-based brand and creative design consultancy. Founded by Walter Landor in 1941, Landor pioneered many of the research, design and consulting methodologies that are now standard in the branding industry. in Cincinnati Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. in the United States, the United Kingdom, Germany, Dubai Dubai (d  bī`), sheikhdom (1995 pop. 674,101), c.1,500 sq mi (3,890 sq km), part of the federation of seven United Arab Emirates, SE Arabia, on the Persian Gulf. , Mexico, Japan, Hong
Kong and Australia; Enterprise IG in the United Kingdom, Germany, France
and Dubai; Fitch fitch: see polecat. in Phoenix and Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. in the United States, the United
Kingdom, Peclers in France and Qatar Qatar or Katar (both: kŭ`tər, gŭ–, kətär`), officially State of Qatar, independent emirate (2005 est. pop. 863,000), c. .--in healthcare - Sudler & Hennessey Hennessey or Hennessy may refer to:
--in promotion and direct marketing - OgilvyOne (in New York, Minneapolis Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. , San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden and Eicoff in the United States, Canada, the United Kingdom, Italy and Brazil); 141 Worldwide (in Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. and Boomerang in the United States, the United Kingdom, Brazil, Mexico, China and Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. ); Wunderman (in RTC See real time clock. , Chicago and San Francisco in the United States, the United Kingdom, the Automotive Group in the United Kingdom, France, Germany, Italy, Greece Greece, Gr. Hellas or Ellas, republic (2005 est. pop. 10,668,000), 50,944 sq mi (131,945 sq km), SE Europe. It occupies the southernmost part of the Balkan Peninsula and borders on the Ionian Sea in the west, on the Mediterranean Sea in the south, on , Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. , Mexico, China, Thailand, Singapore and Australia) --specialist marketing resources - VML (1) (Vector Markup Language) An extension to XML that defines images in vector graphics format for the Web. It also defines how the image is displayed and edited. VML graphics can be modified by style sheets that pertain to the page they reside in. and Pace in the United States and EWA EWA Enterprise Wireless Alliance EWA Electronic Warfare Associates, Inc. EWA Energy from Waste Association (UK) EWA Engineered Wood Association EWA Edgewood Arsenal EWA Earl Walls Associates , Metro The code name for Microsoft's XPS document format. See XML Paper Specification. , BDGworkfutures and Premiere Sponsorship Marketing in the United Kingdom. Manufacturing Revenues and profits at the Group's manufacturing division were down in 2005. Balance sheet and cash flow An unaudited summary of the Group's consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as at 31 December 2005 is attached in Appendix I. As at 31 December 2005, the Group's net debt increased by $428 million (GBP 249 million) to $1,382 million (GBP 804 million) compared with $954 million (GBP 555 million) at 31 December 2004 (which incorporates the IAS 39 adjustment as at 1 January 2005). Net debt averaged $2,083 million (GBP 1,212 million) in 2005, up $222 million (GBP 129 million) against $1,861 million (GBP 1,083 million) in 2004 (up $227 million (GBP 132 million) at 2005 exchange rates). These net debt figures compare with a current equity market capitalisation Noun 1. market capitalisation - an estimation of the value of a business that is obtained by multiplying the number of shares outstanding by the current price of a share market capitalization of approximately $14 billion (GBP 8 billion), giving a total enterprise value of approximately $15 billion (GBP 9 billion). Cash flow strengthened as a result of improved working capital management and cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . In 2005, operating profit before goodwill impairment, amortisation of acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and charges for non-cash based incentive plans was $1,444 million (GBP 794 million), capital expenditure $311 million (GBP 171 million), depreciation $222 million (GBP 122 million), tax paid $247 million (GBP 136 million), interest and similar charges paid $109 million (GBP 60 million) and other net cash inflows of $29 million (GBP 16 million). Free cash flow available for debt repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan , acquisitions, share buybacks and dividends was therefore $1,028 million (GBP 565 million). This free cash flow was partially absorbed Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. by $924 million (GBP 508 million) in net acquisition payments and investments, share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. and cancellations of $276 million (GBP 152 million) and dividends of $182 million (GBP 100 million). This resulted in a net outflow of $355 million (GBP 195 million). The objective introduced in 2003 of covering outgoings outgoings Noun, pl expenses outgoings plural noun expenses, costs, payments, expenditure, overheads, outlay outgoings npl ( by free cash flow was achieved, excluding the net cash element of the acquisition of Grey. A summarised unaudited consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: cash flow statement is included in Appendix I. In the first six weeks of 2006, up until 10 February February: see month. , the last date for which information is available prior to this announcement, net debt averaged $1,466 million (GBP 853 million) up $339 million (GBP 197 million) versus $1,127 million (GBP 656 million) for the same period last year at 2006 exchange rates. Your Board continues to examine ways of deploying its substantial cash flow of almost GBP 600 million or over $1 billion per annum to enhance share owner value. As necessary capital expenditure is expected to remain equal to or less than the depreciation charge in the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , the Company has concentrated on examining potential acquisitions and on returning excess capital to share owners in the form of dividends or share buy-backs. In 2005, in addition to the completion of the acquisition of Grey, the Group continued to make small to medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized acquisitions or investments in high growth geographical or functional areas. The net initial cost of all acquisitions was $688 million (GBP 378 million) in cash, in advertising and media investment management in the United States, the United Kingdom, Denmark Denmark (dĕn`märk), Dan. Danmark, officially Kingdom of Denmark, kingdom (2005 est. pop. 5,432,000), 16,629 sq mi (43,069 sq km), N Europe. , the Netherlands, Spain, Russia, Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. , Argentina, Hong Kong and Australia; in information, insight & consultancy in the United States, the United Kingdom, Poland, China, Hong Kong, Korea and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. ; in public relations & public affairs in the United States, Denmark, Bahrain Bahrain or Bahrein (both: bärān`, bə–), officially Kingdom of Bahrain, constitutional monarchy and archipelago (2005 est. pop. 688,300), 266 sq mi (689 sq km), in the Persian Gulf. , Argentina, China and Australia; in healthcare in the United States, the Netherlands and Switzerland Switzerland (swĭt`sərlənd), Fr. Suisse, Ger. Schweiz, Ital. Svizzera, officially Swiss Confederation, federal republic (2005 est. pop. 7,489,000), 15,941 sq mi (41,287 sq km), central Europe. and in direct, internet & interactive in the United States. Last year, 25.4 million ordinary shares (of which 21.3 million were cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. ) or 2% of the share capital were repurchased at a total cost of $276 million (GBP 152 million) and average price of $10.90 (GBP 5.99) per share. As noted above, your Board has decided to increase the final dividend by 20% to 11.53 cents (6.34p) per share, taking the full year dividend to 16.99 cents (9.34p) per share which is over four times covered, at the headline earnings level. In addition, as the return on capital criteria criteria (krītēr´ē  ),n. for investing in cash acquisitions have been raised, particularly in the United States, the Company will continue to commit to repurchasing up to 2% of its share base in the open market at an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. cost of $273 million (GBP 150 million), when market conditions are appropriate. Such annual rolling share repurchases are believed to have a more significant impact in improving share owner value than sporadic sporadic /spo·rad·ic/ (spo-rad´ic) occurring singly; widely scattered; not epidemic or endemic. spo·rad·ic or spo·rad·i·cal adj. 1. Occurring at irregular intervals. 2. buy-backs. As outlined in the Group's 2005 interim results announcement, the Group proposed a change to its corporate structure which was approved at an Extraordinary General Meeting on 26 September September: see month. 2005. This has resulted in a significant increase in the Group's distributable reserves. Developments in 2005 and 2006 There has been considerable press coverage in the last few weeks in relation to the Group's operations in Italy. In January 2006, the contract of the Group's Italian country manager was terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: and an investigation initiated into certain aspects of the Group's operations there. Legal action against the former country manager has commenced. It is not expected that this will have a significant effect on the Group's financial results. Including associates, the Group had over 92,000 full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full people in over 2,000 offices in 106 countries at the year end. It services over 300 of the Fortune Global 500 companies, over one-half of Nasdaq 100, over 30 of the Fortune e-50, and approximately 333 national or multi-national clients in three or more disciplines. More than 230 clients are served in four disciplines and these clients account for over 50% of Group revenues. The Group also works with over 200 clients in six or more countries. These statistics reflect the increasing opportunities for developing client relationships between activities nationally, internationally and by function. The Group estimates that well over 35% of new assignments in the year were generated through the joint development of opportunities by two or more Group companies. New integration mechanisms, sensitive to global and local opportunities, including WPP global client leaders and country managers, continue to be developed. There is an increasing number of major client creative and integration opportunities at a Group level. Future prospects The world economy continued to grow in 2005, after the recovery in 2003 and 2004, driven by the United States, Asia Pacific, Latin America, the Middle East, Russia and the CIS countries. As a result, your Company has performed at record levels. Whilst like-for-like revenues have grown beyond market expectations, like-for-like average headcount has grown less. Following this productivity improvement, the Group's margins at both the pre- pre- word element [L.], before (in time or space). pre- pref. 1. Earlier; before; prior to: prenatal. 2. and post-incentive levels have improved significantly. In addition, given improved levels of operating profit and margin, incentive pools and variable staff costs are now at record levels. This will improve operational gearing and flexibility in 2006 and beyond. The task of improving property utilisation continues to be a priority with a portfolio of approximately 18 million square feet worldwide. In December 2002, establishment cost as a percentage of revenue was 8.4%, with a goal of reducing this ratio to 7.0% in the medium term. At the end of 2004 the establishment cost to revenue ratio reduced to 7.6% and by December 2005 this ratio improved further to 7.2%, driven by better utilisation and higher revenues. There should be further opportunities to improve utilisation in the future, as the 3.2 million square feet of property within Grey is integrated into the portfolio. As usual, the budgets for 2006 have been prepared on a prudent basis, largely excluding new business, particularly in advertising and media investment management. They predict improvements in like-for-like revenues in the range of 4%, with balanced growth in the first and second half of the year. They also indicate marketing services revenues growing faster than advertising and media investment management. We only have actual data for January in 2006, and this shows revenue well above last year, with like-for-like revenues up 5.5%. Estimated net new business billings so far in 2006 were very strong with over $0.6 billion of net wins according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. trade publications. Worldwide economic conditions seem set to continue to show steady growth in 2006, although concerns remain over the Middle East, oil and commodity prices and the twin deficits of the United States economy. This year's prospects, therefore, look okay, with worldwide advertising and marketing services spending set to rise by at least 4% with your company expected to grow at 4-5% and therefore increasing share. Although growth in the world economy continues to be led by Asia Pacific, Latin America, Africa and the Middle East, Russia and the CIS countries, even Western Continental Europe may continue the improvement seen in the second half of 2005, although the United Kingdom looks soft. 2006 should benefit from the mini-quadrennial impact of the mid-term United States Congressional elections, the FIFA FIFA International Association Football Federation [French Fédération Internationale de Football Association] FIFA n abbr (= Fédération Internationale de Football Association) → FIFA f World Cup and the Torino Torino: see Turin, Italy. Winter Olympics Olympics Sports medicine An international competition among (traditionally) nonprofessional athletes trained in a particular summer or winter sport, which is held every 4 yrs in a selected city. See Paralympics, Special Olympics, World Medical Games. . 2007 should also benefit from the build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. to the United States Presidential Elections United States presidential elections determine who serves as president and vice president of the United States for four-year terms, starting at midday on Inauguration Day, which is January 20 of the year after the election. and the Beijing Beijing (bā-jĭng) or Peking (pē-kĭng, pā–), city (1994 est. urban pop. 6,093,300; 1994 est. total pop. 7,240,700), capital of the People's Republic of China. It is in central Hebei prov. Olympics in 2008, which, as a maxi-quadrennial year, should be a very strong one, buoyed by those events plus heavy United States political advertising and the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Football Championships. In the short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. , growth in advertising and marketing services expenditure may remain in low to medium single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. territory, given the low inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. environment, concentrating distribution and consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. lack of pricing power Pricing Power An economic term referring to the effect that a change in a firm's product price has on the quantity demanded of that product. Pricing power ties in with the "Price Elasticity of Demand. . In this climate, procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. pressure continues (but not in new media) and the significant proportion of fee remuneration REMUNERATION. Reward; recompense; salary. Dig. 17, 1, 7. dampens revenue growth on cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. upturns (and moderates on downturns). However, there continues to be significant opportunities in the area of outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. clients' marketing activities, consolidating client budgets and capitalising on competitive weaknesses. In addition, spending amongst the packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one , pharmaceutical, oil and energy, government (the government continues to be one of the largest advertisers in the UK market) and price-value retail sectors, which remained relatively resilient See resiliency. in the recession of 2001 and 2002, have been buttressed but·tress n. 1. A structure, usually brick or stone, built against a wall for support or reinforcement. 2. Something resembling a buttress, as: a. The flared base of certain tree trunks. b. by increased activity in previously recession-affected sectors like technology, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , media and entertainment and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. . In the long-term, the outlook appears very favourable. Overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. of production in most sectors and the shortage of human capital, the developments in new technologies and media, the growth in importance of internal communications  This article's grammar usage needs improvement. Please edit this article in accordance with Wikipedia's . , the continued strength of the United States
economy and the need to influence distribution, underpin the need for
our clients to continue to differentiate differentiate /dif·fer·en·ti·ate/ (dif?er-en´she-at)1. to distinguish, on the basis of differences. 2. to develop specialized form, character, or function differing from that surrounding it or from the original. their products and services both tangibly tan·gi·ble adj. 1. a. Discernible by the touch; palpable: a tangible roughness of the skin. b. Possible to touch. c. and intangibly. Moreover, the growth of the BRICs (Brazil, Russia, India and China) economies, will add significant opportunities in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe. Advertising and marketing services expenditure as a proportion of gross national products should resume its growth and bust through the cyclical high established in 2000. Given these short-term and long-term trends, your Company has three strategic priorities. In the short-term, having weathered the recession, to capitalise Verb 1. capitalise - supply with capital, as of a business by using a combination of capital used by investors and debt capital provided by lenders capitalize on the 2004 and 2005 up-turn; in the medium-term, to continue to successfully integrate acquired companies; and finally, in the long-term, to continue to develop its businesses in the faster-growing geographical areas of Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe and in the faster-growing functional areas of marketing services, particularly direct, internet, interactive and market research. Incentive plans for 2006 will again focus more on operating profit growth than historically, in order to stimulate stimulate /stim·u·late/ (stim´u-lat) to excite functional activity. stim·u·late v. To arouse a body or a responsive structure to increased functional activity. top-line growth, although objectives will continue to include operating margin improvement, improvement in staff costs to revenue ratios and qualitative qualitative /qual·i·ta·tive/ (kwahl´i-ta?tiv) pertaining to quality. Cf. quantitative. qualitative pertaining to observations of a categorical nature, e.g. breed, sex. Group objectives, including co-ordination, talent management and succession planning Management Succession Planning In organizational development, succession planning is the process of identifying and preparing suitable employees through mentoring, training and job rotation, to replace key players — such as the chief executive officer (CEO) — . In these circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , there is no reason to believe that the Group cannot achieve the revised targets now being set with the announcement of these results, to achieve margins of 14.5% in 2006 and 15.0% in 2007. Budgets for 2006 include this operating margin target. Neither is there any reason why operating margins could not be improved beyond this level by continued focus on revenue growth and careful husbandry husbandry careful management of e.g. animals. Implies thrifty, humane, caring. See also animal husbandry. of costs. Our ultimate objective continues to be to achieve a 19% margin over a period of time and to improve the return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). . Increasingly, WPP is concentrating on its mission of the "management of the imagination", and ensuring it is a big company with the heart and mind of a small one. To aid the achievement of this objective and to develop the benefits of membership in the Group for both clients and our people, the parent company continues to develop its activities in the areas of human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , property, procurement, information technology and practice development. Ten practice areas which span all our brands have been developed initially in media investment management, healthcare, privatisation Noun 1. privatisation - changing something from state to private ownership or control denationalisation, denationalization, privatization social control - control exerted (actively or passively) by group action , new technologies, new faster growing markets, internal communications, retail, entertainment and media, financial services and hi-tech hi-tech adj. Variant of high-tech. hi-tech Adjective using sophisticated, esp. electronic, technology Adj. 1. and telecommunications. And finally...a reminder. Those who hold shares in WPP quite rightly see it as a single entity, and rate it according to its overall achievements. And it is those achievements that this announcement features. It has been a very good year. But of course, what those aggregate numbers fail to reveal is the extraordinary number and range and diversity of quite separate achievements that go to make up that impressive company total. By applying their brains, their talent and their experience to the service of their clients, all of our 74,000 talented people have contributed to these record results. It is those individual skills that our clients value, and pay for. Project by project, as WPP company people helped make their clients more successful, so, project by project, they added inexorably in·ex·o·ra·ble adj. Not capable of being persuaded by entreaty; relentless: an inexorable opponent; a feeling of inexorable doom. See Synonyms at inflexible. to the final figures presented here. So it is entirely right that we should end this release by acknowledging the true source of our success and offering our wholehearted whole·heart·ed adj. Marked by unconditional commitment, unstinting devotion, or unreserved enthusiasm: wholehearted approval. whole gratitude Gratitude agrimony traditional symbol for gratitude. [Flower Symbolism: Flora Symbolica, 172] Androcles because he had once extracted a thorn from its paw, the lion refrained from attacking Androcles in the arena. [Rom. Lit. to all those many who made it happen. 2005 was a record year. 2006, WPP's 21st year, should be an even better one. Further information: Sir Martin Sorrell ) Paul Richardson ) (44) 207 408 2204 Feona McEwan ) Fran Butera (1) 212 632 2235 www.wppinvestor.com This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the company's independent auditors Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. . For further information on factors which could impact the company and the statements contained herein, please refer to public filings by the company with the Securities and Exchange Commission. The statements in this press release should be considered in light of these risks and uncertainties.
Appendix I
WPP GROUP PLC
Preliminary results for the year ended 31 December 2005
Unaudited preliminary consolidated income statement
for the year ended 31 December 2005
Constant
Notes 2005 2004 Currency(1)
----------------------------------------------------------------------
GBPm GBPm +/(-)% +/(-)%
Turnover (billings) 26,673.7 19,598.0 36.1 35.9
======================================================================
Revenue 5,373.7 4,299.5 25.0 22.9
Direct costs (241.0) (225.1) (7.1) (4.9)
----------------------------------------------------------------------
Gross profit 5,132.7 4,074.4 26.0 23.9
Operating costs 4 (4,479.9) (3,598.9) (24.5) (22.6)
----------------------------------------------------------------------
Operating profit 652.8 475.5 37.3 33.6
Share of results of
associates 4 33.9 29.5 14.9 10.3
----------------------------------------------------------------------
Profit before interest
and taxation 686.7 505.0 36.0 32.3
Finance income 5 87.6 77.7 12.7 10.9
Finance costs 5 (182.3) (148.3) (22.9) (22.3)
----------------------------------------------------------------------
Profit before taxation 592.0 434.4 36.3 31.8
Taxation 7 (194.0) (135.0) (43.7) (39.7)
----------------------------------------------------------------------
Profit for the year 398.0 299.4 32.9 28.2
----------------------------------------------------------------------
Attributable to:
Equity holders of the
parent 363.9 273.0 33.3 28.6
Minority interests 34.1 26.4 (29.2) (24.3)
----------------------------------------------------------------------
398.0 299.4 32.9 28.2
----------------------------------------------------------------------
----------------------------------------------------------------------
Headline PBIT 6,19 754.8 560.2 34.7 31.3
Headline PBIT margin 19 14.0% 13.0%
Headline PBT 19 669.0 489.6 36.6 32.5
----------------------------------------------------------------------
Earnings per share(2)
Basic earnings per
ordinary share 9 30.3p 24.0p 26.3 21.6
Diluted earnings per
ordinary share 9 29.7p 23.4p 26.9 22.5
(1) The basis for calculating the constant currency percentage change
shown above is described in the glossary attached to this appendix.
(2) The calculations of the Group's earnings per share and Headline
earnings per share are set out in note 9.
WPP GROUP PLC
Unaudited preliminary consolidated summary cash flow statement
for the year ended 31 December 2005
Notes 2005 2004
----------------------------------------------------------------------
GBPm GBPm
Net cash inflow from operating activities 10 837.5 556.4
Investing activities
Acquisitions and disposals 10 (507.7) (208.9)
Purchase of property, plant and equipment (160.5) (89.7)
Purchase of other intangible assets (incl.
capitalised computer software) (10.8) (5.9)
Proceeds on disposal of property, plant and
equipment 6.7 9.3
----------------------------------------------------------------------
Net cash outflow from investing activities (672.3) (295.2)
Financing activities
Issue of shares 20.3 17.9
Share repurchases and buybacks 10 (152.3) (88.7)
Net (decrease)/increase in borrowings 10 (595.2) 128.6
Financing and share issue costs (2.2) (5.0)
Equity dividends paid (100.2) (81.7)
Dividends paid to minority shareholders in
subsidiary undertakings (24.0) (22.5)
----------------------------------------------------------------------
Net cash outflow from financing activities (853.6) (51.4)
Net (decrease)/increase in cash and cash
equivalents (688.4) 209.8
Translation differences 85.0 (44.6)
Cash and cash equivalents at beginning of year 1,283.0 1,117.8
----------------------------------------------------------------------
Cash and cash equivalents at end of year 10 679.6 1,283.0
----------------------------------------------------------------------
Reconciliation of net cash flow to movement in
net debt:
Net (decrease)/increase in cash and cash
equivalents (688.4) 209.8
Cash inflow/(outflow) from (increase)/decrease
in debt financing 596.9 (124.2)
Net debt acquired (140.8) (9.6)
Other movements (25.9) (8.2)
Translation difference 8.9 (6.7)
----------------------------------------------------------------------
Movement of net debt in the year (249.3) 61.1
Net debt at beginning of year (300.4) (361.5)
IAS 39 adjustment at 1 January 2005 11 (254.3) -
----------------------------------------------------------------------
Net debt at end of year 12 (804.0) (300.4)
----------------------------------------------------------------------
Unaudited preliminary consolidated statement of recognised income
and expense for the year ended 31 December 2005
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Profit for the year 398.0 299.4
Exchange adjustments on foreign currency net
investments 266.1 (102.7)
Revaluation of other investments 21.0 -
Actuarial loss on defined benefit pension schemes (16.5) (18.2)
Deferred tax on defined benefit pension schemes 3.6 3.3
----------------------------------------------------------------------
Total recognised income and expense relating to the
year 672.2 181.8
----------------------------------------------------------------------
Attributable to:
Equity holders of the parent 638.1 155.4
Minority interests 34.1 26.4
----------------------------------------------------------------------
672.2 181.8
----------------------------------------------------------------------
WPP GROUP PLC
Unaudited preliminary consolidated balance sheet
as at 31 December 2005
Notes 2005 2004
----------------------------------------------------------------------
GBPm GBPm
Non-current assets
Intangible assets:
Goodwill 13 5,675.2 4,389.7
Other 14 1,260.6 773.6
Property, plant and equipment 423.5 309.8
Interests in associates 509.9 385.5
Other investments 55.3 8.1
Deferred tax assets 130.3 100.2
Trade and other receivables 15 142.1 59.5
----------------------------------------------------------------------
8,196.9 6,026.4
Current assets
Inventories 281.5 220.6
Trade and other receivables 15 4,795.5 2,541.5
Trade receivables within working capital:(2)
Gross debts - 545.7
Non-returnable proceeds - (261.0)
-------------------
- 284.7
Cash and short-term deposits 1,115.2 1,616.0
----------------------------------------------------------------------
6,192.2 4,662.8
Current liabilities
Trade and other payables 16 (6,828.4) (4,515.9)
Corporate income tax payable (56.5) (53.1)
Bank overdrafts and loans (457.8) (597.8)
----------------------------------------------------------------------
(7,342.7) (5,166.8)
----------------------------------------------------------------------
Net current liabilities (1,150.5) (504.0)
Total assets less current liabilities 7,046.4 5,522.4
----------------------------------------------------------------------
Non-current liabilities
Bonds and bank loans (1,461.4) (1,318.6)
Trade and other payables 17 (703.0) (536.6)
Deferred tax liabilities (533.1) (312.3)
Provisions for post employment benefits (231.4) (202.3)
Provisions for liabilities and charges (131.7) (86.9)
----------------------------------------------------------------------
(3,060.6) (2,456.7)
----------------------------------------------------------------------
Net assets 3,985.8 3,065.7
----------------------------------------------------------------------
Equity
Called up share capital 125.3 118.5
Share premium account 2.1 1,002.2
Shares to be issued 37.2 49.9
Merger reserve (1,388.1) 2,920.6
Other reserves 167.3 (90.6)
Own shares(1) (292.9) (277.7)
Retained earnings 5,253.6 (711.8)
----------------------------------------------------------------------
Equity share owners' funds 18 3,904.5 3,011.1
Minority interests 81.3 54.6
----------------------------------------------------------------------
Total Equity 3,985.8 3,065.7
----------------------------------------------------------------------
(1) Investments in own shares held by the ESOP Trusts.
(2) Following the adoption of IAS 32 and IAS 39 the Group has
reclassified the working capital facility on 1 January 2005 as IFRS
does not permit linked presentation. The 2004 figures have not been
restated as permitted by IFRS 1.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(Notes 1 - 19)
1. Basis of accounting
The unaudited preliminary consolidated financial statements are
prepared under the historical cost convention, except for the
revaluation of certain financial instruments as disclosed in our
accounting policies.
2. Accounting policies
The unaudited preliminary consolidated financial statements comply
with relevant International Financial Reporting Standards (IFRS),
incorporating International Accounting Standards, and with the
accounting policies of the Group which are available on the Group's
website, www.wpp.com.
The disclosures required by IFRS 1 concerning the transition from UK
GAAP to IFRS are disclosed in Appendix III of the Group's 2005 Interim
Report. A detailed summary of the key impacts of the transition from
UK GAAP to IFRS was included in the Appendix to the Group's first
Quarterly Trading Update issued on 22 April 2005.
Statutory Information
In October 2005, pursuant to a Scheme of Arrangement under s425 of the
Companies Act 1985, a new parent company was introduced which is now
called WPP Group plc ("Newco"). The previous parent company has been
renamed and re-registered as WPP 2005 Limited ("Oldco").
The financial information for the years ended 31 December 2005 in
respect of Newco or 2004 in respect of Oldco does not constitute
either company's statutory accounts. The statutory accounts of Oldco
for the year ended 31 December 2004, prepared under UK GAAP, were
delivered to the Registrar of Companies and received an unqualified
auditors' report and did not contain a statement under s237 (2) or (3)
of the Companies Act 1985. The statutory accounts for the year ended
31 December 2005 of Newco 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 2005 has yet to be signed.
Basis of preparation
The introduction of a new holding company constitutes a group
reconstruction and has been accounted for using merger accounting
principles. Therefore, although the group reconstruction did not
become effective until October 2005, the financial statements of WPP
Group plc are presented as if Newco and Oldco had always been part of
the same group. Accordingly, the results of the group for the entire
year ended 31 December 2005 are shown in the consolidated income
statement and the comparative figures for the year ended 31 December
2004 are also prepared on this basis.
The preliminary announcement was approved by the board of directors on
23 February 2006.
3. Currency conversion
The 2005 unaudited preliminary consolidated income statement is
prepared using, among other currencies, an average exchange rate of
US$1.8189 to the pound (2004: US$1.8326). The unaudited preliminary
consolidated balance sheet as at 31 December 2005 has been prepared
using the exchange rate on that day of US$1.7187 to the pound (2004:
US$1.9158).
The basis for calculating the constant currency percentage changes,
shown on the face of the consolidated income statement, is described
in the glossary attached to this appendix.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
4. Operating costs and share of results of associates
Operating costs include:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Amortisation of acquired intangible assets 25.3 -
Goodwill impairment 46.0 40.6
Goodwill write-down relating to utilisation of pre-
acquisition tax losses 1.1 12.6
Profits on disposal of fixed asset investments (4.3) (3.0)
Amounts written off fixed asset investments - 5.0
Share-based payments 68.6 58.8
Other operating costs 4,343.2 3,484.9
----------------------------------------------------------------------
4,479.9 3,598.9
----------------------------------------------------------------------
Share-based payments include:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Stock options 25.9 29.4
Other share-based payments 42.7 29.4
----------------------------------------------------------------------
68.6 58.8
----------------------------------------------------------------------
The impairment charge of GBP 46.0 million (2004: GBP 40.6 million)
relates to a number of under-performing businesses in the Group. In
certain markets, the impact of current, local economic conditions and
trading circumstances on these businesses is sufficiently severe to
indicate impairment to the carrying value of goodwill.
The Group has released GBP 10.1 million (2004: GBP 14.0 million) to
operating profit relating to excess provisions established in respect
of acquisitions completed prior to 2004. At the same time, the Group
includes within operating costs charges for one-off costs, severance
and restructuring charges, including those resulting from integrating
acquisitions. For this reason, the Group considers that the above
combination of releases and charges, when taken together, does not
materially impact the Group's quality of earnings.
Share of results of associates include:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Share of profit before interest and taxation 54.0 48.1
Share of interest and minority interest (0.9) (0.7)
Share of taxation (19.2) (17.9)
----------------------------------------------------------------------
33.9 29.5
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
5. Finance income and finance costs
Finance income includes:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Expected return on pension scheme assets 24.2 21.3
Investment income 5.6 -
Interest income 57.8 56.4
----------------------------------------------------------------------
87.6 77.7
----------------------------------------------------------------------
Finance costs include:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Interest on pension scheme liabilities 32.0 30.8
Interest payable and similar charges(1) 141.4 117.5
----------------------------------------------------------------------
Finance charges (excluding revaluation of financial
instruments) 173.4 148.3
Revaluation of financial instruments 8.9 -
----------------------------------------------------------------------
182.3 148.3
----------------------------------------------------------------------
(1) The charge of GBP 141.4 million for the year ended 31 December
2005 includes expense of GBP 13.8 million arising from the change in
accounting for the Group's convertible bonds following the adoption of
IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39
'Financial Instruments: Recognition and Measurement' on 1 January
2005. Prior year comparatives have not been restated as permitted by
IFRS 1. This approach also applies to the initial recognition and
subsequent re-measurement of the fair value of other financial
instruments shown below. UK GAAP has continued to be applied in
accounting for financial instruments in previous years.
The following are included in the revaluation of financial instruments
shown above:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Movements in fair value of treasury instruments 3.0 -
Revaluation of put options over minority interests
(note 16) 5.8 -
Other 0.1 -
----------------------------------------------------------------------
8.9 -
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
6. Segmental analysis
Reported contributions by operating sector were as follows:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Revenue
Advertising, Media Investment Management 2,606.4 1,985.3
Information, Insight & Consultancy 810.4 744.8
Public Relations & Public Affairs 534.4 445.2
Branding & Identity, Healthcare and Specialist
Communications 1,422.5 1,124.2
----------------------------------------------------------------------
5,373.7 4,299.5
----------------------------------------------------------------------
Headline PBIT(1)
Advertising, Media Investment Management 402.7 295.0
Information, Insight & Consultancy 83.4 66.1
Public Relations & Public Affairs 75.3 58.4
Branding & Identity, Healthcare and Specialist
Communications 193.4 140.7
----------------------------------------------------------------------
754.8 560.2
----------------------------------------------------------------------
Headline PBIT Margin % %
Advertising, Media Investment Management 15.5 14.9
Information, Insight & Consultancy 10.3 8.9
Public Relations & Public Affairs 14.1 13.1
Branding & Identity, Healthcare and Specialist
Communications 13.6 12.5
----------------------------------------------------------------------
14.0 13.0
----------------------------------------------------------------------
(1) Headline PBIT is defined in note 19.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
6. Segmental analysis (continued)
Reported contributions by geographical area were as follows:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Revenue
United Kingdom 808.1 728.5
North America 2,106.9 1,651.9
Continental Europe 1,410.3 1,134.8
Asia Pacific, Latin America, Africa & Middle East 1,048.4 784.3
----------------------------------------------------------------------
5,373.7 4,299.5
----------------------------------------------------------------------
Headline PBIT(1)
United Kingdom 84.6 75.7
North America 350.1 251.2
Continental Europe 176.1 128.1
Asia Pacific, Latin America, Africa & Middle East 144.0 105.2
----------------------------------------------------------------------
754.8 560.2
----------------------------------------------------------------------
Headline PBIT Margin % %
United Kingdom 10.5 10.4
North America 16.6 15.2
Continental Europe 12.5 11.3
Asia Pacific, Latin America, Africa & Middle East 13.7 13.4
----------------------------------------------------------------------
14.0 13.0
----------------------------------------------------------------------
(1) Headline PBIT is defined in note 19.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
7. Taxation
The Group tax rate on Headline PBT(1) is 29.0% (2004: 27.6%). The tax
charge comprises:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Current tax
UK Corporation tax at 30%
Current year 19.9 22.5
Prior years (11.4) -
----------------------------------------------------------------------
8.5 22.5
Foreign tax
Current year 177.3 108.6
Prior years 9.9 9.6
----------------------------------------------------------------------
187.2 118.2
----------------------------------------------------------------------
Total Current Tax 195.7 140.7
----------------------------------------------------------------------
Deferred tax
Current year (1.7) (5.7)
----------------------------------------------------------------------
Total tax on profits 194.0 135.0
----------------------------------------------------------------------
(1) Headline PBT is defined in note 19.
8. Ordinary dividends
The Board has recommended a final dividend of 6.34p (2004: 5.28p) per
ordinary share in addition to the interim dividend paid of 3.00p
(2004: 2.50p) per ordinary share. This makes a total for the year of
9.34p (2004: 7.78p) per ordinary share, an increase of 20%. The final
dividend is expected to be paid on 3 July 2006 to share owners on the
register at 2 June 2006.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
9. Earnings per share
Basic EPS
The reconciliation between Reported and Headline EPS, and between
earnings figures used in calculating them, is as follows:
Constant
Currency
2005 2004 +/(-)% +/(-)%
----------------------------------------------------------------------
Reported earnings(1) (GBPm) 363.9 273.0
Headline earnings (GBPm) (note 19) 440.9 328.2
----------------------------------------------------------------------
Average shares used in Basic EPS
calculation (m) 1,200.1 1,136.1
----------------------------------------------------------------------
Reported EPS 30.3p 24.0p 26.3 21.6
Headline EPS 36.7p 28.9p 27.0 23.4
----------------------------------------------------------------------
(1) Reported earnings is equivalent to profit for the period
attributable to equity holders of the parent.
Diluted EPS
The diluted Reported and Headline EPS are set out below:
Constant
Currency
2005 2004 +/(-)% +/(-)%
----------------------------------------------------------------------
Diluted Reported earnings (GBPm) 363.9 285.2
Diluted Headline earnings (GBPm) 440.9 340.4
----------------------------------------------------------------------
Average shares used in diluted EPS
calculation (m) 1,224.8 1,219.6
----------------------------------------------------------------------
Diluted Reported EPS 29.7p 23.4p 26.9 22.5
Diluted Headline EPS 36.0p 27.9p 29.0 25.4
----------------------------------------------------------------------
Diluted EPS has been calculated based on the Reported and Headline
Earnings amounts above. For the year ended 31 December 2004, both the
$287.5 million convertible bonds and the GBP 450 million convertible
bonds were dilutive and earnings for the purposes of this calculation
consequently included an additional GBP 12.2 million.
A reconciliation between the shares used in calculating Basic and
Diluted EPS is as follows:
2005 2004
----------------------------------------------------------------------
m m
Average shares used in Basic EPS calculation 1,200.1 1,136.1
Dilutive share options outstanding 18.6 20.6
Other potentially issuable shares 6.1 4.6
$287.5 million convertible bonds - 16.4
GBP 450 million convertible bonds - 41.9
----------------------------------------------------------------------
Shares used in Diluted EPS calculation 1,224.8 1,219.6
----------------------------------------------------------------------
At 31 December 2005 there were 1,252,899,372 ordinary shares in issue.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
10. Analysis of cash flows
The following tables analyse the items included within the main cash
flow headings on page 13:
Net cash inflow from operating activities:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Operating profit 652.8 475.5
Adjustments for:
Non cash share-based incentive plans (including stock
options) 68.6 58.8
Depreciation of property, plant and equipment 111.4 96.7
Impairment of goodwill 46.0 40.6
Goodwill write-down relating to utilisation of pre-
acquisition tax losses 1.1 12.6
Amortisation of acquired intangible assets 25.3 -
Amortisation of other intangible assets 10.7 6.7
Profits on disposal of fixed asset investments (4.3) (3.0)
Loss on sale of property, plant and equipment 1.1 1.9
Amounts written off fixed asset investments - 5.0
----------------------------------------------------------------------
Operating cash flow before movements in working
capital 912.7 694.8
Movements in working capital and provisions 107.6 (4.8)
----------------------------------------------------------------------
Cash generated by operations 1,020.3 690.0
Corporation and overseas tax paid (136.0) (101.3)
Interest and similar charges (128.2) (99.7)
Interest received 62.4 48.9
Investment income 5.6 -
Dividends from associates 13.4 18.5
----------------------------------------------------------------------
837.5 556.4
----------------------------------------------------------------------
Acquisitions and disposals:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Initial cash consideration (561.2) (97.3)
Cash and cash equivalents acquired 173.9 6.3
Earnout payments (96.7) (78.6)
Loan note redemptions (33.0) (26.6)
Purchase of other investments (including associates) (29.0) (22.0)
Proceeds on disposal of investments 38.3 9.3
----------------------------------------------------------------------
(507.7) (208.9)
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
10. Analysis of cash flows (continued)
Share repurchases and buybacks:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Share cancellations (including brokerage fees) (123.3) (73.7)
Purchase of own shares by ESOP trusts (29.0) (15.0)
----------------------------------------------------------------------
(152.3) (88.7)
----------------------------------------------------------------------
Net (decrease)/increase in borrowings:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Increase in drawings on bank loans 17.1 0.9
Repayment of $287.5 million convertible bonds (154.5) -
Repayment of $125 million Grey debt (65.3) -
Repayment of working capital facility (277.2) -
Repayment of $200 million bonds (115.3) -
Proceeds from issue of $650 million 10 year bonds - 358.2
Repayment of EUR 350 million bonds - (230.5)
----------------------------------------------------------------------
(595.2) 128.6
----------------------------------------------------------------------
Cash and cash equivalents:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Cash at bank and in hand 1,029.0 1,372.0
Short-term bank deposits 86.2 244.0
Overdrafts(1) (435.6) (333.0)
----------------------------------------------------------------------
679.6 1,283.0
----------------------------------------------------------------------
(1) Bank overdrafts are included in cash and cash equivalents because
they form an integral part of the Group's cash management.
11. Financial instruments
The IAS 32 and IAS 39 adjustments to net debt at 1 January 2005 are
made up of the following:
GBPm
----------------------------------------------------------------------
Reclassification of components of convertible debt 32.4
Reclassification of the deferred gain recognised under UK GAAP (18.6)
Recognition of financial instruments at fair value (7.1)
Reclassification of the working capital facility(1) (261.0)
----------------------------------------------------------------------
(254.3)
----------------------------------------------------------------------
(1) The Group had a working capital facility (the advance of cash
financing against which certain trade debts have been assigned) that
IAS 32 and IAS 39 require to be presented as a bank borrowing. As the
Group has elected to apply IAS 32 and IAS 39 from 1 January 2005, net
debt at 31 December 2004 has been presented to comply with 2004 UK
GAAP as a deduction from debtors, in accordance with the 'linked
presentation' required by FRS 5 (Reporting the substance of
transactions). The drawdown on the facility was transferred to debt at
1 January 2005. The facility was repaid and cancelled on 31 August
2005.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
12. Net debt
31 December 31 December
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Cash and short-term deposits 1,115.2 1,616.0
Bank loans and overdrafts due within one year (457.8) (597.8)
Corporate bond and loans due after one year (1,461.4) (1,318.6)
----------------------------------------------------------------------
Net debt (per balance sheet) (804.0) (300.4)
Working capital facility (Note 11) - (261.0)
----------------------------------------------------------------------
Net debt including working capital facility (804.0) (561.4)
----------------------------------------------------------------------
Elsewhere in this release net debt at 31 December 2004 is shown as GBP
554.7 million to provide a comparable basis with net debt at 31
December 2005. This includes the entire IAS 39 adjustment of GBP 254.3
million at 1 January 2005 described in Note 11.
13. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings increased by GBP
1,285.5 million in the year. This includes both goodwill arising on
acquisitions completed in the year and adjustments to goodwill
relating to acquisitions completed in prior years, net of impairment
charges. Goodwill in relation to associate undertakings increased by
GBP 82.5 million in the period.
Future anticipated payments to vendors in respect of both deferred and
earnout obligations totalled GBP 220.0 million (2004: GBP 298.6
million). Earnouts are 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 7 March 2005 the Group completed the acquisition of Grey Global
Group, Inc. (Grey) in consideration for 78 million new WPP ordinary
shares and GBP 376 million in cash. Grey has been consolidated in the
results of the Group from the date of completion.
In aggregate, for the year ended 31 December 2005, acquisitions made
in the year contributed GBP 757.4 million to revenue, GBP 74.6 million
to operating profit and GBP 100.0 million to Headline PBIT.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
14. Other intangible assets
The following are included in other intangibles:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Brands with an indefinite life 897.0 742.6
Acquired intangibles 330.3 7.0
Other (including capitalised computer software) 33.3 24.0
----------------------------------------------------------------------
1,260.6 773.6
----------------------------------------------------------------------
Acquired intangible assets increased by GBP 323.3 million during the
year, primarily due to the recognition at fair value of corporate
brands and customer relationships resulting from the acquisition of
Grey. These assets are being amortised over their respective useful
lives, which vary from 2 to 20 years, depending on the nature of the
asset concerned. In accordance with IAS 12, the Group has a deferred
tax liability of GBP 504.4 million at 31 December 2005, being the
difference between the book and tax carrying values of these
intangibles. The Group does not consider that any deferred tax
liability in respect of these items will ever crystallise.
15. Trade and other receivables
Amounts falling due within one year:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Trade receivables 3,999.3 2,058.5
VAT and sales taxes recoverable 43.0 29.1
Corporate income taxes recoverable 21.0 24.2
Other debtors 350.8 238.1
Prepayments and accrued income 381.4 191.6
----------------------------------------------------------------------
4,795.5 2,541.5
----------------------------------------------------------------------
Amounts falling due after more than one year:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Other debtors 115.8 54.2
Prepayments and accrued income 26.3 5.3
----------------------------------------------------------------------
142.1 59.5
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
16. Trade and other payables: amounts falling due within one year
The following are included in trade and other payables falling due
within one year:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Trade creditors 4,659.3 2,885.3
Deferred income 604.2 405.8
Payments due to vendors 81.3 146.6
Loan notes due to vendors 13.6 7.2
Liabilities in respect of put option agreements
with vendors(1) 50.4 -
Other creditors and accruals 1,419.6 1,071.0
----------------------------------------------------------------------
6,828.4 4,515.9
----------------------------------------------------------------------
(1) The recognition of liabilities in respect of put options arises
from the adoption of IAS 32 and IAS 39. Prior years have not been
restated as permitted by IFRS 1.
17. Trade and other payables: amounts falling due after more than
one year
The following are included in trade and other payables falling due
after more than one year:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Corporate income tax payable 372.8 290.6
Payments due to vendors 138.7 152.0
Liabilities in respect of put option agreements with
vendors 39.6 -
Other creditors and accruals 151.9 94.0
----------------------------------------------------------------------
703.0 536.6
----------------------------------------------------------------------
The following table sets out the directors' best estimates of future
deferred and earnout related obligations:
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Within one year 81.3 146.6
Between 1 and 2 years 71.9 65.0
Between 2 and 3 years 14.7 61.0
Between 3 and 4 years 20.3 3.4
Between 4 and 5 years 31.8 21.4
Over 5 years - 1.2
----------------------------------------------------------------------
220.0 298.6
----------------------------------------------------------------------
The Group does not consider there to be any material contingent
liabilities as at 31 December 2005.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
18. Reconciliation of movements in consolidated equity share owners'
funds
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Profit for the period 363.9 273.0
Ordinary dividends (100.2) (81.6)
----------------------------------------------------------------------
263.7 191.4
Non cash share-based incentive plans (including
stock options) 68.6 58.8
Exchange adjustments on foreign currency net
investments 266.1 (102.7)
Ordinary shares issued in respect of acquisitions 506.4 -
Share issue/cancellation costs (3.6) (0.8)
Other share issues 18.3 32.8
Share cancellations (123.3) (73.6)
Actuarial loss on defined benefit schemes (16.5) (18.2)
Deferred tax on defined benefit pension schemes 3.6 3.3
Net additions of own shares by ESOP Trusts (29.0) (14.9)
Transfer to goodwill (5.1) (67.3)
Tax benefit of share-based payments 12.9 8.7
Revaluation of other investments 21.0 -
Recognition of financial instruments during the
year (27.6) -
Other movements - 3.4
----------------------------------------------------------------------
Net additions to equity share owners' funds 955.5 20.9
Opening equity share owners' funds 3,011.1 2,990.2
Impact of adoption of IAS 32 and IAS 39 on 1
January 2005 (62.1) -
----------------------------------------------------------------------
Closing equity share owners' funds 3,904.5 3,011.1
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
19. Non-GAAP measures of performance
Reconciliation of Headline PBIT and Headline PBT under IFRS to 2004 UK
GAAP
Margin (%) 2005 Margin (%) 2004
----------------------------------------------------------------------
GBPm GBPm
Revenue 5,373.7 4,299.5
Headline PBIT (IFRS) 14.0% 754.8 13.0% 560.2
Share-based payments
(IFRS 2) 0.6% 32.4 0.7% 28.9
Accounting for associates
(IAS 28) 0.4% 20.1 0.4% 18.6
----------------------------------------------------------------------
52.5 47.5
----------------------------------------------------------------------
Headline PBIT
(2004 UK GAAP) 15.0% 807.3 14.1% 607.7
----------------------------------------------------------------------
Headline PBT (IFRS) 669.0 489.6
Adjustments to Headline
PBIT (as above) 52.5 47.5
Additional interest on
convertible debt (IAS 32) 13.8 -
Interest on associates
(IAS 28) (0.1) (0.1)
----------------------------------------------------------------------
Headline PBT (2004 UK GAAP) 735.2 537.0
----------------------------------------------------------------------
Reconciliation of profit before interest and taxation to
Headline PBIT for the year ended 31 December 2005
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Profit before interest and taxation 686.7 505.0
Profits on disposal of fixed asset investments (4.3) (3.0)
Amounts written off fixed asset investments - 5.0
Goodwill impairment 46.0 40.6
Goodwill write-down relating to utilisation of
pre-acquisition tax losses 1.1 12.6
Amortisation of acquired intangible assets 25.3 -
----------------------------------------------------------------------
Headline PBIT 754.8 560.2
----------------------------------------------------------------------
Finance income 87.6 77.7
Finance charges (excluding revaluation of
financial instruments) (173.4) (148.3)
----------------------------------------------------------------------
(85.8) (70.6)
----------------------------------------------------------------------
Interest cover on Headline PBIT(1) 8.8 times 7.9 times
----------------------------------------------------------------------
(1) The finance charges for the year ended 31 December 2005 of GBP
173.4 million shown above include GBP 13.8 million arising from the
change in accounting for the Group's convertible bonds under IFRS.
Interest cover on a comparable basis with prior years would be 10.5
times.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
19. Non-GAAP measures of performance (continued)
Reconciliation of profit before taxation to Headline PBT
and Headline earnings for the year ended 31 December 2005
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Profit before taxation 592.0 434.4
Profits on disposal of fixed assets (4.3) (3.0)
Amounts written off fixed asset investments - 5.0
Goodwill impairment 46.0 40.6
Goodwill write-down relating to utilisation of
pre-acquisition tax losses 1.1 12.6
Amortisation of acquired intangibles 25.3 -
Revaluation of financial instruments 8.9 -
----------------------------------------------------------------------
Headline PBT 669.0 489.6
Taxation (194.0) (135.0)
Minority interests (34.1) (26.4)
----------------------------------------------------------------------
Headline earnings 440.9 328.2
----------------------------------------------------------------------
Ordinary dividends 100.3 81.6
----------------------------------------------------------------------
Dividend cover on Headline earnings 4.4 times 4.0 times
----------------------------------------------------------------------
Reported margins before and after share of results of associates
Margin (%) 2005 Margin (%) 2004
----------------------------------------------------------------------
GBPm GBPm
Revenue 5,373.7 4,299.5
Headline PBIT 14.0% 754.8 13.0% 560.2
----------------------------------------------------------------------
Share of results of
associates 33.9 29.5
----------------------------------------------------------------------
Headline PBIT excluding
share of results of
associates 13.4% 720.9 12.3% 530.7
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
19. Non-GAAP measures of performance (continued)
Reconciliation of free cash flow for the year ended 31 December
2005
2005 2004
----------------------------------------------------------------------
GBPm GBPm
Cash generated by operations 1,020.3 690.0
Plus:
Interest received 62.4 48.9
Investment income 5.6 -
Dividends received from associates 13.4 18.5
Issue of shares 20.3 17.9
Proceeds on disposal of property, plant and equipment 6.7 9.3
Profits on disposal of fixed asset investments 4.3 3.0
Less:
Movements in working capital and provisions (107.6) 4.8
Loss on sale of property, plant and equipment (1.1) (1.9)
Amounts written off fixed asset investments - (5.0)
Interest and similar charges (128.2) (99.7)
Purchase of property, plant and equipment (160.5) (89.7)
Purchase of other intangible assets (including
capitalised computer software) (10.8) (5.9)
Corporation and overseas tax paid (136.0) (101.3)
Dividends paid to minority shareholders in subsidiary
undertakings (24.0) (22.5)
----------------------------------------------------------------------
Free Cash Flow(1) 564.8 466.4
----------------------------------------------------------------------
(1) Elsewhere in this release free cash flow in 2005 has been rounded
to GBP 565 million.
WPP GROUP PLC
GLOSSARY AND BASIS OF PREPARATION
2004 UK GAAP
UK Generally Accepted Accounting Principles ('UK GAAP') extant in
respect of 2004 - the basis of preparation of the Group's consolidated
financial statements for the year ended 31 December 2004, as
previously reported, prior to the implementation of International
Financial Reporting Standards ('IFRS').
Average net debt
Average net debt is calculated as the average daily net bank
borrowings of the Group, derived from the Group's automated banking
system. Net debt at a period end is calculated as the sum of the net
bank borrowings of the Group, derived from the cash ledgers and
accounts in the balance sheet.
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.
Estimated net new billings
Net new billings represent the estimated annualised impact on billings
(turnover) of new business gained from both existing and new clients,
net of existing client business lost. The estimated impact is based
upon initial assessments of the clients' media budget, which may not
necessarily result in actual billings of the same amount.
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 the 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 ('Headline operating profit')
Profit on ordinary activities before finance income, finance costs,
taxation, goodwill impairment, goodwill write-down relating to
utilisation of pre-acquisition tax losses, amortisation of acquired
intangible assets and fixed assets gains and write-downs.
Headline PBT
Profit on ordinary activities before taxation, goodwill impairment,
goodwill write-down relating to the utilisation of previously
unrecognised pre-acquisition tax losses, amortisation of acquired
intangible assets, fixed assets gains and write-downs and the
revaluation of financial instruments.
Headline earnings
Headline PBT less taxation 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.
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