WPP 2006 Interim Results.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 27% at $25.8 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. 14.4 billion) --Reported revenue up over 16% to $5.12 billion (GBP 2.86 billion) --Like-for-like revenue up 5% --Headline operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. up over 20% to $646 million (GBP 361 million) --Headline operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: up 0.5 margin points to 12.6% --Headline profit before tax up over 24% to $566 million (GBP 316 million) --Profit before tax up almost 30% to $514 million (GBP 287 million) --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 over 20% at 29.7 cents (16.6p) --Interim ordinary dividend up 20% to 6.45 cents (3.60p) per share WPP (NASDAQ: WPPGY) today reported its 2006 Interim Results. --Billings up over 27% at $25.8 billion (GBP 14.4 billion) --Reported revenue up over 16% to $5.12 billion (GBP 2.86 billion) and up almost 13% in constant currencies --Like-for-like revenue up 5% --Headline operating profit up over 20% to $646.5 million (GBP 361.0 million) from $536.5 million (GBP 299.6 million) and up almost 17% in constant currencies --Headline operating margin up 0.5 margin points to 12.6% --Headline profit before tax up over 24% to $566.1 million (GBP 316.1 million) from $456.3 million (GBP 254.8 million) and up almost 20% in constant currencies --Profit before tax up almost 30% to $514.1 million (GBP 287.1 million) from $396.7 million (GBP 221.5 million) and up almost 25% in constant currencies --Diluted headline earnings per share up over 20% to 29.7 cents (16.6p) from 24.7 cents (13.8p) and up over 15% in constant currencies --Diluted earnings per share up almost 29% to 25.6 cents (14.3p) and up almost 23% in constant currencies --Interim ordinary dividend up 20% to 6.45 cents (3.60p) per share --Average net debt up $277 million (GBP 150 million) to $2,161 million (GBP 1,170 million) from $1,884 million (GBP 1,020 million), despite cash payments of $514 million (GBP 287 million) for net cash acquisition payments and 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. in the first six months --Estimated net new business 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 $4.078 billion (GBP 2.204 billion). Rated No. 1 in almost all new business surveys for the first half of 2006 --Strategic opportunities remain new markets and new technologies In this press release not all the figures and ratios used are readily available from the unaudited interim 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 note 17 of Appendix I. Summary of Results The Board of WPP announces its unaudited interim results for the six months ended 30 June June: see month. 2006. These represent record first half results, reflecting continued significant improvement over last year and further evidence of growth across the whole business, both functionally and geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge . Billings were up over 27% at $25.800 billion (GBP 14.407 billion). Reportable revenue was up 16.1% at $5.129 billion (GBP 2.864 billion). On a constant currency basis, revenue was up 12.7% compared with last year, with currency fluctuations in the first six months accounting for over 3 percentage points of the Group's revenue growth, principally due to the strength of the US dollar against sterling. On a like-for-like basis, which excludes the impact of acquisitions and currency, revenues were up 5.0% in the first half, a slight increase on the encouraging organic growth of 4.8% in the first quarter of 2006. Headline earnings before interest, depreciation and 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. ("EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ") was up 22.0% to $766.3 million (GBP 427.9 million) and up over 18% in constant currencies. Headline operating profit was up 20.5% to $646.5 million (GBP 361.0 million) from $536.5 million (GBP 299.6 million) and up 16.8% in constant currencies. Headline operating margins rose by 0.5 margin points to 12.6% from 12.1%, in line with the full year margin target of 14.5%. Before 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. and 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. incentives (including the cost of share-based compensation), operating margins rose by 0.5 margin points to 16.3% from 15.8%. Short and long-term incentives and the cost of share-based incentives amounted to $188.2 million (GBP 105.1 million) or 22.7% of operating profits before bonus and taxes, as improvements in operating profitability continued to swell incentive pools towards maximum levels. On a reported basis the Group's staff cost to revenue ratio, including incentives, was down 0.3 margin points to 60.4% in the first half of 2006, compared with the same period last year. On a like-for-like basis, the average number of people in the Group, excluding associates, was 76,436 in the first half of the year, compared to 73,933 in 2005, an increase of 3.4%. On the same basis, the total number of people in the Group at 30 June 2006 was 77,535 compared to 75,004 in June 2005, also an increase of 3.4%. Headline profit before tax was up 24.1% to $566.1 million (GBP 316.1 million) from $456.3 million (GBP 254.8 million) or up 19.9% in constant currencies. Net finance costs (excluding the 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) were flat with last year at $80.4 million (GBP 44.9 million) compared with $80.2 million (GBP 44.8 million) in 2005, reflecting higher interest rates, offset by the impact of improved liquidity as a result of a reduction in working capital. Reported profit before tax rose by 29.6% to $514.1 million (GBP 287.1 million) from $396.7 million (GBP 221.5 million). In constant currencies pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta profits rose by 24.8%. The tax rate on headline profit before tax on ordinary activities was 29.0%, slightly up on the first half 2005 rate of 28.5%. Profits attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to ordinary share owners rose by 30.5% to $316.4 million (GBP 176.7 million) from $242.5 million (GBP 135.4 million) or up 24.4% in constant currencies. 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 rose by 20.3% to 29.7 cents (16.6p) from 24.7 cents (13.8p). In constant currencies, earnings per share on the same basis rose by 15.6%. Diluted reported earnings per share were up 28.8% to 25.6 cents (14.3p) and up 22.7% in constant currencies. The Board declares an increase of 20% in the interim ordinary dividend to 6.45 cents (3.60p) per share. The record date for this interim dividend is 13 October October: see month. 2006, payable on 13 November November: see month. 2006. Further details of WPP's financial performance are provided in Appendix I. Review of Operations Revenue by Region The pattern of revenue growth differed regionally. The table below gives details of the proportion of revenue and revenue growth by region for the first six months of 2006:
Region Constant Reported Constant Like-for-
Currency(1) Revenue Currency(1) like(2)
Revenue as Growth Revenue Revenue
a % of 06/05 Growth Growth
Total Group 06/05 06/05
% % %
North America 39.6 16.7 11.3 4.5
United Kingdom 14.6 6.7 6.7 1.2
Continental Europe 25.7 11.9 11.4 4.5
----------- -------- ----------- ----------
Asia Pacific,
Latin America,
Africa & Middle East 20.1 29.3 22.8 9.4
----------- -------- ----------- ----------
TOTAL GROUP 100.0 16.1 12.7 5.0
(1) Constant currency growth excludes the effects of currency
movements.
(2) Like-for-like growth excludes the effects of currency
movements and the impact of acquisitions.
On a constant currency basis, the Group grew at almost 13% and 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 exception of the United Kingdom. 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. continues to grow, despite the twin deficits and threat of inflation. 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. remains one of the fastest growing regions 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 and 2005. Asia Pacific shows strong growth across the region, with Mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. 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 22% and 23%. 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). , although relatively more difficult, has improved over last year and the United Kingdom has stabilised Adj. 1. stabilised - made stable or firm stabilized stable - resistant to change of position or condition; "a stable ladder"; "a stable peace"; "a stable relationship"; "stable prices" , at low levels of growth. 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, however, to be two-paced, with the United Kingdom,
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). , France, 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. , 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. , 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. , 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. , 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. and Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the growing slower 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. . Africa and the Middle East is currently the fastest growing region, along with Central and Eastern Europe. There is no doubt that 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. , and Africa as a whole, will benefit from the World Cup in 2010. Perhaps not as significantly as China will from 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. 2008, but certainly the event will be of similar political, social and economic significance. Record estimated net new business billings of $4.078 billion (GBP 2.204 billion) were won in the first half of the year (up 15% on the comparable period last year) and the Group was rated No. 1 in almost all new business surveys. Revenue by Communications Services Sector and Brand The pattern of revenue growth varied by communications services sector and company brand. The table below gives details of the proportion of revenue and revenue growth by communications services sector for the first six months of 2006:
Communications Constant Reported Constant Like-for-
Services Currency(1) Revenue Currency(1) like(2)
Sector Revenue as Growth Revenue Revenue
a % of 06/05 Growth Growth
Total 06/05 06/05
Group % % %
Advertising, Media
Investment Management 47.3 14.2 10.7 3.4
Information, Insight &
Consultancy 15.3 13.3 10.9 4.1
Public Relations &
Public Affairs 10.1 15.3 11.6 5.5
Branding & Identity,
Healthcare and
Specialist
Communications 27.3 21.6 18.0 8.0
----------- -------- ----------- ----------
TOTAL GROUP 100.0 16.1 12.7 5.0
----------- -------- ----------- ----------
(1) Constant currency growth excludes the effects of currency
movements.
(2) Like-for-like growth excludes the effects of currency
movements and the impact of acquisitions.
Media investment management continues to show the strongest growth of all our communications services businesses, along with direct, internet and interactive and healthcare communications. Direct and digitally-related activities now account for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 20% of the Group's revenues, which are running at the rate of approximately $11 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 2005. It seems that the public relations and public affairs businesses, in particular, are benefiting from the growth of new technologies, where editorial publicity is very effective and probably more effective than paid for publicity. Social networking See social networking site. social networking - social network , in particular, is offering a new form of word-of-mouth "advertising", that is very effective. These new technologies are probably boosting the growth rates of public relations and public affairs activities. Advertising and Media Investment Management On a constant currency basis, advertising and media investment management revenues grew by almost 11%, with like-for-like revenue growth well over 3%. Operating margins improved by 0.7 margin points. These businesses generated estimated net new business billings of $3.504 billion (GBP 1.894 billion). Information, Insight and Consultancy The Group's information, insight and consultancy businesses continued their growth, with constant currency revenues increasing by almost 11% and operating margins improving. Public Relations and Public Affairs In constant currencies, the Group's public relations and public affairs revenues rose by over 11%, with operating margins maintained at almost 14%. Branding and Identity, Healthcare and Specialist Communications The Group's branding and identity, healthcare and specialist communications constant currency revenues were up 18%, with operating margins up 0.5 margin points, as our direct, internet and interactive businesses targeted sales growth and invested in talent. Particularly good performances were registered by several companies in this sector in the first half - including, in promotion and direct marketing OgilvyOne, Wunderman, G2 and Bridge Worldwide; in branding and identity Landor Landor is a surname, and may refer to:
MJM Metropolitan Japanese Ministry MJM Married Jewish Male . Cash Flow and Balance Sheet A summary of the Group's unaudited cash flow statement and balance sheet and notes as at 30 June 2006 are provided in Appendix I. In the first half of 2006, operating profit was $552 million (GBP 308 million), depreciation, amortisation and 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. $184 million (GBP 103 million), non-cash based incentive charges of $68 million (GBP 38 million), net interest paid $66 million (GBP 37 million), tax paid $124 million (GBP 69 million), capital expenditure $133 million (GBP 74 million) and other net cash inflows $90 million (GBP 50 million). Free cash flow available for working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , debt repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan , acquisitions and share re-purchases was, therefore, $571 million (GBP 319 million). This free cash flow was 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 $224 million (GBP 125 million) in net cash acquisition payments and investments (of which $57 million (GBP 32 million) was for initial acquisition payments net of disposal proceeds, $145 million (GBP 81 million) was for earnout Earnout A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals. Notes: The financial goals are usually stated as a percentage of gross sales or earnings. payments and the balance related to prior year loan note redemptions), and $290 million (GBP 162 million) by share re-purchases, a total outflow of $514 million (GBP 287 million). This resulted in a net cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of $57 million (GBP 32 million), in line with the Group's free cash flow objectives. Average net debt in the first six months of 2006 rose by $277 million (GBP 150 million) to $2,161 million (GBP 1,170 million), compared to $1,884 million (GBP 1,020 million) in 2005, at 2006 exchange rates. On 30 June 2006 net debt was $2,251 million (GBP 1,219 million), against $2,294 million (GBP 1,242 million) on 30 June 2005, a slight reduction. The Board continues to examine ways of deploying the Group's substantial surplus cash flow, which now amounts to over $1 billion (almost GBP 600 million) per annum, to enhance share owner value, given that interest cover remains strong at 8.0 times in the first half of 2006, in comparison to 6.7 times on a comparable basis, in the first half of 2005. As necessary capital expenditure, mainly on information technology and property, is expected to remain equal to or less than the depreciation charge in the long term, the Company has continued to concentrate on examining possible acquisitions or returning excess capital to share owners in the form of dividends and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. share buy-backs. In the first half of 2006, 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 ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge or functional areas. In the first six months of this year, acquisitions and increased equity stakes have been concentrated in advertising & media investment management in the United States, the United Kingdom, Germany, South Africa, 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. , China, 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). and 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. ; in information, insight & consultancy in China; in public relations & public affairs in India; 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. In addition to increasing the interim dividend by 20% to 6.45 cents (3.60p) per share, the Company continues to focus on examining the alternative between increasing dividends and accelerating share buy-backs, and completed a review of its share buy-back policy earlier this year. The Group will accelerate its share repurchase programme and will now aim to buy-back up to 2-3% of its share capital each year, as compared to 1-2% historically. In the first half of the year 24.0 million ordinary shares were purchased, equivalent to 1.9% of the share capital, including 5.6 million ordinary shares acquired by the WPP ESOP ESOP See: Employee Stock Ownership Plan ESOP See Employee Stock Ownership Plan (ESOP). in connection with restricted stock awards. These shares were acquired at an average price of $12.05 (GBP 6.73) per share and total cost of $289.2 million (GBP 161.5 million). Of these shares, 18.4 million were purchased in the market and subsequently 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. . Client Developments in the First Half of 2006 Including associates, the Group currently employs almost 97,000 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. It services over 300 of the Fortune Global 500 companies, over one-half of the Nasdaq 100, over 30 of the Fortune e-50, and approximately 330 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. This reflects the increasing opportunities for co-ordination between activities both nationally and internationally. The Group also works with nearly 200 clients in 6 or more countries. The Group estimates that more than 35% of new assignments in the first half of the year were generated through the joint development of opportunities by two or more Group companies. Current Progress and Future Prospects The Group's performance in the first half of the year mirrored the continuing good economic conditions in the United States, Central and Eastern Europe, Asia Pacific, Latin America, Africa and the Middle East, reinforced re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. by a mild improvement in Western Europe, although the United Kingdom remains relatively weak, even against 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. . In the last few months, Germany has shown strength and Spain slower growth, with Brazil also softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. . Like-for-like revenue was up 5% in the first half of 2006, exceeding budgeted levels. This trend continued into the second half, with July July: see month. like-for-like revenues up almost 5% . Experts forecast that the industry will grow at 4% this year, which, so far, the group has exceeded, growing market share. An operating margin of 12.6% was achieved, in line with the Group's revised margin target for 2006 of 14.5%. The first half of 2006 saw another significant improvement in activity, even against the strong performance of 2005. Levels of activity in 2006 should match, or surpass, those seen in 2005 and there are significant new business opportunities at both the network and parent company levels. As long as the United States economy holds up, 2007 should be a good year too, buoyed by the build up to Beijing 2008 and heavy United States political spending, in advance of a Presidential election, which may pit Hillary Clinton Clinton. 1 Town (1990 pop. 12,767), Middlesex co., S Conn., on Long Island Sound; settled 1663, set off from Killingworth and inc. 1838. The school that later became Yale opened here in 1702. against John McCain For McCain's grandfather and father, see John S. McCain, Sr. and John S. McCain, Jr., respectively John Sidney McCain III (born August 29, 1936 in Panama Canal Zone) is an American politician, war veteran, and currently the Republican Senior U.S. Senator from Arizona. . 2008 should be a bumper year, with the culmination of these two major events 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 Austria Austria (ô`strēə), Ger. Österreich [eastern march], officially Republic of Austria, federal republic (2005 est. pop. 8,185,000), 32,374 sq mi (83,849 sq km), central Europe. and Switzerland. 2009 may see slower growth, following the strength of 2008 and as the new United States administration wrestles with the country's economic issues. Corporate profitability remains strong on both sides of the Atlantic, in fact, at the highest levels as a proportion of GNP GNP See: Gross National Product for almost 50 years and, as a result, advertising and marketing services spending does too, if anything continuing to strengthen. However, in a low inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. environment, which remains a government and central bank priority and which has been with us continuously for almost 15 years, significant, continuous, like-for-like sales Like-for-Like Sales The portion of current sales achieved through activities that are comparable to the activities of the previous year. Notes: Using like-for-like sales is a method of valuation that attempts to exclude any effects of expansion, acquisition, or other gains remain difficult to achieve. 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. , disintermediation The elimination of the distributor and/or retailer (the middleman) when making a purchase. The term is used to refer to purchasing directly from a manufacturer's Web site, the benefits of which are convenience, fast turnaround time and sometimes lower prices. via the web, slowing population growth and concentrating distribution result in limited 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. . This pressure is at its most intense in the slower growth, but large, mature markets of the United States and Western Europe. Concerns remain of stagflation stagflation, in economics, a word coined in the 1970s to describe a combination of a stagnant economy and severe inflation. Previously, these two conditions had not existed at the same time because lowered demand, brought about by a recession (see depression), , as the United States and other nations wrestle with increasing oil prices, twin fiscal and trade deficits and the potential impact of changes in interest rate policy. The consumer remains under pressure on both sides of the Atlantic from increasing levels of debt, low savings ratios and potentially fragile fragile - brittle house prices. Any slack 1. (operating system) slack - Internal fragmentation. Space allocated to a disk file but not actually used to store useful information. 2. (jargon) slack in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. has not to date been taken up by significant increases in corporate capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , beyond replacement spending. Company boards remain cautious, perhaps cowed cow 1 n. 1. The mature female of cattle of the genus Bos. 2. The mature female of other large animals, such as whales, elephants, or moose. 3. A domesticated bovine of either sex or any age. by regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. measures and fear of failure. The average life of a Chief Executive Officer, remains around four years and apparently under two years for a Chief Marketing Officer in the United States. In this environment, clients are seeking new ways of reaching the consumer and finding new geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. growth opportunities. Satellite and cable television, outdoor and out-of-home advertising Out-of-home advertising (also referred to as OOH) is essentially all type of advertising that reaches the consumer while he or she is outside the home. This is in contrast to broadcast, print, or internet advertising, which may be delivered to viewers out-of-home (e.g. and radio in traditional media and more importantly direct, internet and interactive are taking a growing share of client spending, albeit from lower absolute and relative levels. Similarly, but geographically, Asia (particularly but not exclusively China and India), Latin America, despite political 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 and the growth of populism populism Political program or movement that champions the common person, usually by favourable contrast with an elite. Populism usually combines elements of the left and right, opposing large business and financial interests but also frequently being hostile to established and protectionism protectionism Policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other handicaps placed on imports. , 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. are becoming more and more significant, again from lower absolute and relative levels. We are finding that our industry is becoming more and more two-paced. Slow growth in traditional media, such as network television, newspapers and magazines, more rapid growth in new media, such as direct, internet and interactive, driven by new technology. Slower growth in the mature markets of the United States and Western Europe, more rapid growth in Central and Eastern Europe, Asia, Latin America, Africa and the Middle East. Growth patterns even vary within regions - for example, slow growth in Western Europe alongside rapid growth in Central and Eastern Europe. In these market conditions, the prospects for our industry remain very good, as the need for differentiation differentiation, in biology, series of changes that occur in cells and tissues during development, resulting in their specialization. This, in turn, permits a greater variety of organisms. through innovation and branding and global expansion grow. The two critical strategic opportunities for our clients, media owners and ourselves, remain geographical expansion across the globe and assessing and dealing with the implications of new technological developments - which could be glibly glib adj. glib·ber, glib·best 1. a. Performed with a natural, offhand ease: glib conversation. b. described as "China and the internet". Clearly, it is more complex than this, with China an icon for Asia, Latin America, Africa and the Middle East and Central and Eastern Europe and the internet an icon for mobile, iPods(TM), video iPods A common name for the first iPod that supported video, introduced in late 2005. Also called the 5th Generation iPod (5G iPod). Apple refers to Video iPods as simply "iPod." See iPod. (TM), PVRs, HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates , IPTV (Internet Protocol TV) Also called "TV over IP," IPTV delivers scheduled TV programs and video-on-demand (VOD) via the IP protocol and digital streaming techniques used to watch video on the Internet. , gaming and social networks, amongst others. Geographical development remains relatively easy to manage. Technological development remains relatively difficult to manage as it is taxing to forecast the impact of such changes, although increasing complexity makes us more valuable to our clients. The prospects for trading performance improvements at WPP remain good too. A year ago the Group revised its margin target for 2005 to 13.7% and for 2006 to 14.2%. These were raised again at the time of the Group's 2005 preliminary announcement to 14.5% for 2006 from 14.2% and to 15.0% for 2007 from 14.7%. The Group is on track to achieve this accelerated timetable “Schedule” redirects here. For other uses, see Schedule (disambiguation). A timetable or schedule is an organized list or schedule, usually set out in tabular form, providing information about a series of arranged events: in particular, the time at which . Our long term operating margin target remains 19%. Margin targets for 2008 and 2009 will be outlined in the preliminary results announcement for 2006 in February February: see month. 2007. Plans, budgets and forecasts will continue to be made on a conservative basis and considerable attention is still being focused on achieving margin and staff cost to revenue or gross margin targets. Margins continue to be strong in important parts of the business. In addition to influencing absolute levels of cost, the initiatives taken by the parent company 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 The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. , information technology and practice development continue to improve the flexibility of the Group's cost base. The Group continues to improve co-operation and co-ordination between companies in order to add value to our clients' businesses and our people's careers, an objective which has been specifically built into short-term incentive plans. Particular emphasis and success has been achieved in the areas of 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 markets, retailing, internal communications  This article's grammar usage needs improvement. Please edit this article in accordance with Wikipedia's . , hi-tech hi-tech adj. Variant of high-tech. hi-tech Adjective using sophisticated, esp. electronic, technology Adj. 1. , 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. and media and entertainment. The Group continues to lead the industry, in co-ordinating investment geographically and functionally through parent company initiatives, which competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. initially 'pooh-poohed' but now attempt to imitate im·i·tate tr.v. im·i·tat·ed, im·i·tat·ing, im·i·tates 1. To use or follow as a model. 2. a. . The Group also continues to concentrate on its long-term targets and strategic objectives of improving operating profits; improving operating margins by half to one margin point per annum or more depending on revenue growth; improving staff cost to revenue or gross margin ratios by 0.6 margin points per annum or more depending on revenue growth; converting 25-33% of incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenue to profit; growing revenue faster than industry averages and encouraging co-operation among Group companies. As clients face an increasingly undifferentiated undifferentiated /un·dif·fer·en·ti·at·ed/ (un-dif?er-en´she-at-ed) anaplastic. un·dif·fer·en·ti·at·ed adj. Having no special structure or function; primitive; embryonic. market place, particularly in mature markets, the Group is competitively well positioned to offer them the creativity they desire, along with the ability to deliver the most effective co-ordinated communications in the most efficient manner. The rise of the procurement function, the increasing concentration of distribution and the legislative acceptance of media ownership concentration in several countries, will further 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. consolidation amongst clients, media owners, wholesalers and retailers and last, but not least, advertising and marketing services agencies. The Group is very well positioned 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 these developments and to focus on developing the best talents, the strongest management structures and the most innovative incentive plans in the industry for our people. This announcement has been filed at the Company Announcements Office of the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. and is being distributed to all owners of Ordinary shares and American Depository Receipts American Depository Receipt n. called in the banking trade an ADR, it is a receipt issued by American banks to Americans as a substitute for actual ownership of shares of foreign stocks. . Copies are available to the public at the Company's registered office. The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 introduced in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, . This announcement 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 US 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 announcement should be considered in light of these risks and uncertainties.
Appendix I
WPP GROUP PLC
Interim results for the six months ended 30 June 2006
Unaudited consolidated interim income statement
for the six months ended 30 June 2006
Six Six Year
months months ended
ended ended 30 Constant 31
30 June June Currency December
Notes 2006 2005 (1) 2005
----------------------------------------------------------------------
GBP m GBP m +/(-)% +/(-)% GBP m
Turnover (billings) 14,407.1 11,333.6 27.1 23.3 26,673.7
======================================================================
Revenue 2,864.4 2,467.5 16.1 12.7 5,373.7
Direct costs (149.2) (111.1) (34.3) (31.6) (241.0)
----------------------------------------------------------------------
Gross profit 2,715.2 2,356.4 15.2 11.9 5,132.7
Operating costs 4 (2,407.3) (2,103.8) (14.4) (11.1) (4,479.9)
----------------------------------------------------------------------
Operating profit 307.9 252.6 21.9 17.9 652.8
Share of results of
associates 4 25.3 13.7 84.7 77.3 33.9
----------------------------------------------------------------------
Profit before
interest and
taxation 333.2 266.3 25.1 20.9 686.7
Finance income 5 51.0 36.8 38.6 36.3 87.6
Finance costs 5 (97.1) (81.6) (19.0) (17.2) (182.3)
----------------------------------------------------------------------
Profit before
taxation 287.1 221.5 29.6 24.8 592.0
Taxation 7 (91.7) (72.6) (26.3) (23.7) (194.0)
----------------------------------------------------------------------
Profit for the
period 195.4 148.9 31.2 25.4 398.0
----------------------------------------------------------------------
Attributable to:
Equity holders of
the parent 176.7 135.4 30.5 24.4 363.9
Minority interests 18.7 13.5 (38.5) (35.4) 34.1
----------------------------------------------------------------------
195.4 148.9 31.2 25.4 398.0
----------------------------------------------------------------------
----------------------------------------------------------------------
Headline PBIT 6,17 361.0 299.6 20.5 16.8 754.8
Headline PBIT margin 17 12.6% 12.1% 14.0%
Headline PBT 17 316.1 254.8 24.1 19.9 669.0
----------------------------------------------------------------------
Earnings per
share(2)
Basic earnings per
ordinary share 9 14.7p 11.4p 28.9 23.1 30.3p
Diluted earnings per
ordinary share 9 14.3p 11.1p 28.8 22.7 29.7p
(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 consolidated interim cash flow statement
for the six months ended 30 June 2006
Six Six Year
months months ended
ended ended 31
30 June 30 June December
Notes 2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Net cash (outflow)/inflow from
operating activities 10 (26.8) (34.0) 837.5
Investing activities
Acquisitions and disposals 10 (124.8) (336.0) (507.7)
Purchases of property, plant and
equipment (66.6) (68.1) (160.5)
Purchases of other intangible assets
(incl. capitalised computer software) (6.9) (2.1) (10.8)
Proceeds on disposal of property,
plant and equipment 4.8 2.1 6.7
----------------------------------------------------------------------
Net cash outflow from investing
activities (193.5) (404.1) (672.3)
Financing activities
Issue of shares 49.5 15.8 20.3
Share repurchases and buybacks 10 (161.5) (75.1) (152.3)
Net increase/(decrease) in borrowings 10 273.0 (96.0) (595.2)
Financing and share issue costs (0.9) (0.9) (2.2)
Equity dividends paid - - (100.2)
Dividends paid to minority
shareholders in subsidiary
undertakings (15.3) (14.3) (24.0)
----------------------------------------------------------------------
Net cash inflow/(outflow) from
financing activities 144.8 (170.5) (853.6)
Net decrease in cash and cash
equivalents (75.5) (608.6) (688.4)
Translation differences (113.7) 34.5 85.0
Cash and cash equivalents at beginning
of period 679.6 1,283.0 1,283.0
----------------------------------------------------------------------
Cash and cash equivalents at end of
period 10 490.4 708.9 679.6
----------------------------------------------------------------------
Reconciliation of net cash flow to
movement in net debt:
Net decrease in cash and cash
equivalents (75.5) (608.6) (688.4)
Cash (inflow)/outflow from
(increase)/decrease in debt financing (272.9) 96.5 596.9
Net debt acquired - (140.8) (140.8)
Other movements 9.9 (32.4) (25.9)
Translation difference (76.8) (2.0) 8.9
----------------------------------------------------------------------
Movement of net debt in the period (415.3) (687.3) (249.3)
Net debt at beginning of period (804.0) (554.7) (554.7)
----------------------------------------------------------------------
Net debt at end of period 11 (1,219.3)(1,242.0) (804.0)
----------------------------------------------------------------------
WPP GROUP PLC
Unaudited consolidated interim statement of recognised income and
expense for the six months ended 30 June 2006
Six Six Year
months months ended
ended ended 31
30 June 30 June December
2006 2005 2005
GBP m GBP m GBP m
Profit for the period 195.4 148.9 398.0
Exchange adjustments on foreign currency net
investments (210.9) 141.7 266.1
Revaluation of other investments 2.7 15.8 21.0
Actuarial loss on defined benefit pension
schemes - - (16.5)
Deferred tax on defined benefit pension
schemes - - 3.6
----------------------------------------------------------------------
Total recognised income and expense relating
to the period (12.8) 306.4 672.2
----------------------------------------------------------------------
Attributable to:
Equity holders of the parent (31.5) 292.9 638.1
Minority interests 18.7 13.5 34.1
----------------------------------------------------------------------
(12.8) 306.4 672.2
----------------------------------------------------------------------
WPP GROUP PLC
Unaudited consolidated interim balance sheet
as at 30 June 2006
30 June 30 June 31 Dec.
Notes 2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Non-current assets
Intangible assets:
Goodwill 12 5,492.7 5,431.3 5,675.2
Other 13 1,178.7 1,085.3 1,260.6
Property, plant and equipment 410.0 384.6 423.5
Interests in associates 443.0 507.0 509.9
Other investments 119.7 32.0 55.3
Deferred tax assets 111.4 118.4 130.3
Trade and other receivables 123.9 134.0 142.1
----------------------------------------------------------------------
7,879.4 7,692.6 8,196.9
Current assets
Inventories 365.3 346.7 281.5
Trade and other receivables 4,653.8 4,121.8 4,795.5
Cash and short-term deposits 854.8 1,163.0 1,115.2
----------------------------------------------------------------------
5,873.9 5,631.5 6,192.2
Current liabilities
Trade and other payables 14 (6,281.7)(5,687.7)(6,828.4)
Corporate income tax payable (50.1) (54.1) (56.5)
Bank overdrafts and loans (843.6) (873.5) (457.8)
----------------------------------------------------------------------
(7,175.4)(6,615.3)(7,342.7)
----------------------------------------------------------------------
Net current liabilities (1,301.5) (983.8)(1,150.5)
----------------------------------------------------------------------
Total assets less current liabilities 6,577.9 6,708.8 7,046.4
----------------------------------------------------------------------
Non-current liabilities
Bonds and bank loans (1,230.5)(1,531.5)(1,461.4)
Trade and other payables 15 (690.2) (647.4) (703.0)
Deferred tax liabilities (501.4) (452.2) (533.1)
Provision for post-employment benefits (231.4) (202.3) (231.4)
Provisions for liabilities and charges (114.4) (133.3) (131.7)
----------------------------------------------------------------------
(2,767.9)(2,966.7)(3,060.6)
----------------------------------------------------------------------
Net assets 3,810.0 3,742.1 3,985.8
----------------------------------------------------------------------
Equity
Called-up share capital 124.9 126.3 125.3
Share premium account 52.6 1,035.3 2.1
Shares to be issued 15.7 44.5 37.2
Merger reserve (1,374.7) 3,414.6 (1,388.1)
Other reserves (39.4) 90.9 167.3
Own shares(1) (289.9) (281.2) (292.9)
Retained earnings 5,240.4 (752.5) 5,253.6
----------------------------------------------------------------------
Equity share owners' funds 16 3,729.6 3,677.9 3,904.5
Minority interests 80.4 64.2 81.3
----------------------------------------------------------------------
Total Equity 3,810.0 3,742.1 3,985.8
----------------------------------------------------------------------
(1) Investments in own shares held by the ESOP Trusts.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17)
1. Basis of accounting
The unaudited consolidated interim 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 consolidated interim financial statements comply
with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) and with the accounting policies
of the Group which were set out on pages 145 to 149 of the 2005 Annual
Report and Accounts. No changes have been made to the Group's
accounting policies since this time.
Statutory Information and Independent Review
The unaudited consolidated interim financial statements for the
six months to 30 June 2006 and 30 June 2005 do not constitute
statutory accounts. The financial information for the year ended 31
December 2005 does not constitute statutory accounts for the purposes
of s240 of the Companies Act 1985. The statutory accounts for the year
ended 31 December 2005 have been 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 interim financial statements are unaudited but have been reviewed
by the auditors and their report is set out on page 29.
The announcement of the interim results was approved by the board
of directors on 17 August 2006.
3. Currency conversion
The 2006 unaudited consolidated interim income statement is
prepared using, among other currencies, an average exchange rate of
US$1.7908 to the pound (period ended 30 June 2005: US$1.8728; year
ended 31 December 2005: US$1.8189). The unaudited consolidated interim
balance sheet as at 30 June 2006 has been prepared using the exchange
rate on that day of US$1.8469 to the pound (30 June 2005: US$1.7918;
31 December 2005: US$1.7187).
The basis for calculating the constant currency percentage
changes, shown on the face of the unaudited consolidated interim
income statement, is described in the glossary attached to this
appendix.
4. Operating costs and share of results of associates
Operating costs include:
Six Six Year
months months ended
ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Amortisation of acquired intangible assets 23.0 11.8 25.3
Goodwill impairment 10.0 20.5 46.0
Goodwill write-down relating to utilisation
of pre-acquisition tax losses 3.0 1.0 1.1
Gains on disposal of investments (4.2) - (4.3)
Share-based incentive plans 37.9 30.3 68.6
Other operating costs 2,337.6 2,040.2 4,343.2
----------------------------------------------------------------------
2,407.3 2,103.8 4,479.9
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
4. Operating costs and share of results of associates (continued)
The goodwill impairment charge of GBP 10.0 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 Directors will
reassess the need for any further impairment write-downs at year end.
Charges in respect of share-based incentive plans include:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Share options 9.2 13.5 25.9
Other share-based incentive plans 28.7 16.8 42.7
----------------------------------------------------------------------
37.9 30.3 68.6
----------------------------------------------------------------------
Share of results of associates include:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Share of profit before interest and
taxation 34.4 23.8 54.0
Share of exceptional gains 4.0 - -
Share of interest and minority
interest 0.6 (0.4) (0.9)
Share of taxation (13.7) (9.7) (19.2)
----------------------------------------------------------------------
25.3 13.7 33.9
----------------------------------------------------------------------
Share of exceptional gains of GBP 4.0 million in the six months ended
30 June 2006 represents the Group's share of negative goodwill
recognised in the income statements of its associate undertakings
during the period.
5. Finance income and finance costs
Finance income includes:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Expected return on pension scheme
assets 13.0 12.0 24.2
Investment income 0.5 - 5.6
Interest income 37.5 24.8 57.8
----------------------------------------------------------------------
51.0 36.8 87.6
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
5. Finance income and finance costs (continued)
Finance costs include:
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Interest on pension scheme liabilities 16.5 16.0 32.0
Interest payable and similar charges 79.4 65.6 141.4
----------------------------------------------------------------------
Finance charges (excluding revaluation of
financial instruments) 95.9 81.6 173.4
Revaluation of financial instruments 1.2 - 8.9
----------------------------------------------------------------------
97.1 81.6 182.3
----------------------------------------------------------------------
The following are included in the revaluation of financial
instruments shown above:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Movements in fair value of treasury
instruments 2.9 2.1 3.0
Revaluations of put options over
minority interests (1.7) (2.0) 5.8
Other - (0.1) 0.1
----------------------------------------------------------------------
1.2 - 8.9
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
6. Segmental analysis
Reported contributions by operating sector were as follows:
Six Six Year
months months ended
ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Revenue
Advertising and Media Investment Management 1,354.4 1,185.9 2,606.4
Information, Insight & Consultancy 438.9 387.5 810.4
Public Relations & Public Affairs 290.3 251.8 534.4
Branding & Identity, Healthcare and
Specialist Communications 780.8 642.3 1,422.5
----------------------------------------------------------------------
2,864.4 2,467.5 5,373.7
----------------------------------------------------------------------
Headline PBIT(1)
Advertising and Media Investment Management 190.3 158.6 402.7
Information, Insight & Consultancy 41.5 36.1 83.4
Public Relations & Public Affairs 40.3 35.0 75.3
Branding & Identity, Healthcare and
Specialist Communications 88.9 69.9 193.4
----------------------------------------------------------------------
361.0 299.6 754.8
----------------------------------------------------------------------
Headline PBIT margin % % %
Advertising and Media Investment Management 14.1 13.4 15.5
Information, Insight & Consultancy 9.5 9.3 10.3
Public Relations & Public Affairs 13.9 13.9 14.1
Branding & Identity, Healthcare and
Specialist Communications 11.4 10.9 13.6
----------------------------------------------------------------------
12.6 12.1 14.0
----------------------------------------------------------------------
(1) Headline PBIT is defined in note 17.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
6. Segmental analysis (continued)
Reported contributions by geographical area were as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Revenue
United Kingdom 415.1 389.0 808.1
North America 1,135.5 973.4 2,106.9
Continental Europe 741.4 662.3 1,410.3
Asia Pacific, Latin America, Africa &
Middle East 572.4 442.8 1,048.4
----------------------------------------------------------------------
2,864.4 2,467.5 5,373.7
----------------------------------------------------------------------
Headline PBIT(1)
United Kingdom 36.7 31.3 84.6
North America 176.1 151.9 350.1
Continental Europe 85.8 68.9 176.1
Asia Pacific, Latin America, Africa &
Middle East 62.4 47.5 144.0
----------------------------------------------------------------------
361.0 299.6 754.8
----------------------------------------------------------------------
Headline PBIT margin % % %
United Kingdom 8.8 8.0 10.5
North America 15.5 15.6 16.6
Continental Europe 11.6 10.4 12.5
Asia Pacific, Latin America, Africa &
Middle East 10.9 10.7 13.7
----------------------------------------------------------------------
12.6 12.1 14.0
----------------------------------------------------------------------
(1) Headline PBIT is defined in note 17.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
7. Taxation
The Group tax rate on Headline PBT(1) is 29.0% (30 June 2005:
28.5% and 31 December 2005: 29.0%).
The Group tax rate on Reported PBT is 31.9% (30 June 2005: 32.8%
and 31 December 2005: 32.8%).
The tax charge comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Current tax
UK Corporation tax at 30% 11.9 8.3 8.5
Foreign tax 80.9 66.4 187.2
----------------------------------------------------------------------
Total Current Tax 92.8 74.7 195.7
Deferred tax
Current year (1.1) (2.1) (1.7)
----------------------------------------------------------------------
Tax expense 91.7 72.6 194.0
----------------------------------------------------------------------
(1) Headline PBT is defined in note 17.
8. Ordinary dividends
The Board has recommended an interim dividend of 3.60p (2005:
3.00p) per ordinary share. This is expected to be paid on 13 November
2006 to share owners on the register at 13 October 2006.
The Board recommended a final dividend of 6.34p per ordinary share
in respect of 2005. This was approved by the company's shareholders at
the Annual General Meeting on 27 June 2006 and paid on 3 July 2006.
9. Earnings per share
Basic EPS
The calculation of basic Reported and Headline EPS is as follows:
Six Six
months months Year
ended ended Constant ended
30 June 30 June Currency 31 Dec.
2006 2005 +/(-)% +/(-)% 2005
----------------------------------------------------------------------
Reported earnings(1) (GBP m) 176.7 135.4 363.9
Headline earnings (GBP m)
(note 17) 205.7 168.7 440.9
----------------------------------------------------------------------
Average shares used in Basic
EPS calculation (m) 1,205.2 1,192.7 1,200.1
----------------------------------------------------------------------
Reported EPS 14.7p 11.4p 28.9 23.1 30.3p
Headline EPS 17.1p 14.1p 21.3 16.1 36.7p
----------------------------------------------------------------------
(1) Reported earnings is equivalent to profit for the period
attributable to equity holders of the parent.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
9. Earnings per share (continued)
Diluted EPS
The calculation of diluted Reported and Headline EPS is set out below:
Six months Six months Year
ended ended Constant ended
30 June 30 June Currency 31 Dec
2006 2005 +/(-)% +/(-)% 2005
----------------------------------------------------------------------
Diluted reported earnings
(GBP m) 177.8 135.4 363.9
Diluted headline earnings
(GBP m) 206.8 168.7 440.9
----------------------------------------------------------------------
Shares used in diluted
EPS calculation (m) 1,243.5 1,218.6 1,224.8
----------------------------------------------------------------------
Diluted reported EPS 14.3p 11.1p 28.8 22.7 29.7p
Diluted headline EPS 16.6p 13.8p 20.3 15.6 36.0p
----------------------------------------------------------------------
Diluted EPS has been calculated based on the Reported and Headline
Earnings amounts above. For the six months ended 30 June 2006 the $150
million Grey convertible was dilutive and earnings were consequently
increased by GBP 1.1 million. For the six months ended 30 June 2005,
and the year ended 31 December 2005, the Grey convertible was
accretive to earnings and therefore excluded from the calculation of
dilutive earnings. For the six months ended 30 June 2006 and 30 June
2005, and the year ended 31 December 2005, the GBP 450 million
convertible bonds were accretive to earnings and therefore excluded
from the calculation of dilutive earnings.
A reconciliation between the shares used in calculating Basic and
Diluted EPS is as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec.
2006 2005 2005
----------------------------------------------------------------------
m m m
Average shares used in Basic EPS
calculation 1,205.2 1,192.7 1,200.1
Dilutive share options outstanding 18.0 19.3 18.6
Other potentially issuable shares 11.4 6.6 6.1
$150 million Grey convertible bonds 8.9 - -
----------------------------------------------------------------------
Shares used in Diluted EPS calculation 1,243.5 1,218.6 1,224.8
----------------------------------------------------------------------
At 30 June 2006 there were 1,249,246,636 ordinary shares in issue.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
10. Analysis of cash flows
The following tables analyse the items included within the main
cash flow headings on page 11:
Net cash (outflow)/inflow from operating activities:
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec.
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Operating profit 307.9 252.6 652.8
Adjustments for:
Non-cash share-based incentive plans
(including share options) 37.9 30.3 68.6
Depreciation of property, plant and equipment 60.8 46.0 111.4
Impairment of goodwill 10.0 20.5 46.0
Goodwill write-down relating to utilisation of
pre-acquisition tax losses 3.0 1.0 1.1
Amortisation of acquired intangible assets 23.0 11.8 25.3
Amortisation of other intangible assets 6.1 5.0 10.7
Gains on disposal of investments (4.2) - (4.3)
(Gains)/losses on sale of property, plant and
equipment (0.2) - 1.1
----------------------------------------------------------------------
Operating cash flow before movements in
working capital and provisions 444.3 367.2 912.7
Movements in working capital and provisions (375.4) (317.9) 107.6
----------------------------------------------------------------------
Cash generated by operations 68.9 49.3 1,020.3
Corporation and overseas tax paid (69.3) (57.3) (136.0)
Interest and similar charges paid (76.9) (63.0) (128.2)
Interest received 39.5 27.5 62.4
Investment income - - 5.6
Dividends from associates 11.0 9.5 13.4
----------------------------------------------------------------------
(26.8) (34.0) 837.5
----------------------------------------------------------------------
Acquisitions and disposals:
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec.
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Initial cash consideration (50.0) (468.9) (561.2)
Cash and cash equivalents acquired (net) 15.6 176.1 173.9
Earnout payments (81.0) (69.3) (96.7)
Loan note redemptions (11.5) (3.2) (33.0)
Purchase of other investments (including
associates) (11.6) (8.2) (29.0)
Proceeds on disposal of investments 13.7 37.5 38.3
----------------------------------------------------------------------
(124.8) (336.0) (507.7)
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
10. Analysis of cash flows (continued)
Share repurchases and buybacks:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Share cancellations (including
brokerage fees) (123.1) (58.9) (123.3)
Purchase of own shares by ESOP Trusts (38.4) (16.2) (29.0)
----------------------------------------------------------------------
(161.5) (75.1) (152.3)
----------------------------------------------------------------------
Net increase/(decrease) in borrowings:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Increase in drawings on bank loans 273.0 123.8 17.1
Repayment of $287.5 million
convertible bonds - (154.5) (154.5)
Repayment of $125 million Grey debt - (65.3) (65.3)
Repayment of working capital facility - - (277.2)
Repayment of $200 million bonds - - (115.3)
----------------------------------------------------------------------
273.0 (96.0) (595.2)
----------------------------------------------------------------------
Cash and cash equivalents:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Cash at bank and in hand 741.2 1,088.7 1,029.0
Short-term bank deposits 113.6 74.3 86.2
Overdrafts(1) (364.4) (454.1) (435.6)
----------------------------------------------------------------------
490.4 708.9 679.6
----------------------------------------------------------------------
(1) Bank overdrafts are included in cash and cash equivalents
because they form an integral part of the Group's cash management.
11. Net debt
30 June 30 June 31 Dec.
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Cash and short-term deposits 854.8 1,163.0 1,115.2
Bank loans and overdrafts due within one
year (843.6) (594.5) (457.8)
Corporate bond and loans due after one year(1,230.5)(1,531.5)(1,461.4)
Working capital facility - (279.0) -
----------------------------------------------------------------------
(1,219.3)(1,242.0) (804.0)
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
12. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings decreased by
GBP 182.5 million in the period. This includes both goodwill arising
on acquisitions completed in the period and adjustments to goodwill
relating to acquisitions completed in prior years, net of impairment
charges and the effect of currency translation. Goodwill in relation
to associate undertakings decreased by GBP 54.0 million in the period.
Future anticipated payments to vendors in respect of both deferred
and earnout obligations totaled GBP 167.7 million (period ended 30
June 2005: GBP 233.1 million; year ended 31 December 2005: GBP 220.0
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.
In aggregate, for the six months ended 30 June 2006, acquisitions
completed during the period contributed GBP 22.0 million to revenue,
GBP 2.8 million to operating profit and GBP 3.5 million to Headline
PBIT.
13. Other intangible assets
The following are included in other intangibles:
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Brands with an indefinite useful life 853.0 794.0 897.0
Acquired intangibles 296.8 260.2 330.3
Other (including capitalised computer
software) 28.9 31.1 33.3
----------------------------------------------------------------------
1,178.7 1,085.3 1,260.6
----------------------------------------------------------------------
14. Trade and other payables: amounts falling due within one year
The following are included in trade and other payables falling due
within one year:
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Trade payables 4,250.2 3,713.4 4,659.3
Deferred income 584.0 570.9 604.2
Payments due to vendors 46.0 87.1 81.3
Loan notes due to vendors 2.1 34.1 13.6
Liabilities in respect of put option
agreements with vendors 50.2 23.5 50.4
Dividends payable 76.1 62.6 -
Other creditors and accruals 1,273.1 1,196.1 1,419.6
----------------------------------------------------------------------
6,281.7 5,687.7 6,828.4
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
15. 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:
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Corporate income and other taxes payable 378.7 320.3 372.8
Payments due to vendors 121.7 146.0 138.7
Liabilities in respect of put option
agreements with vendors 40.4 32.6 39.6
Other creditors and accruals 149.4 148.5 151.9
----------------------------------------------------------------------
690.2 647.4 703.0
----------------------------------------------------------------------
The following table sets out payments due to vendors, comprising
deferred consideration and the directors' best estimates of future
earnout related obligations:
30 June 30 June 31 December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Within one year 46.0 87.1 81.3
Between 1 and 2 years 43.8 68.5 71.9
Between 2 and 3 years 26.4 36.9 14.7
Between 3 and 4 years 27.9 14.9 20.3
Between 4 and 5 years 18.8 18.9 31.8
Over 5 years 4.8 6.8 -
----------------------------------------------------------------------
167.7 233.1 220.0
----------------------------------------------------------------------
The Group does not consider there to be any material contingent
liabilities as at 30 June 2006.
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
16. Reconciliation of movements in consolidated equity share
owners' funds
Six Six Year
months months ended
ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Profit for the period attributable to equity
share owners 176.7 135.4 363.9
Ordinary dividends (76.1) (62.6) (100.2)
----------------------------------------------------------------------
100.6 72.8 263.7
Ordinary shares issued in respect of
acquisitions - 506.4 506.4
Other ordinary shares issued 48.4 15.4 18.3
Share cancellations (123.1) (58.9) (123.3)
Share issue/cancellation costs (0.7) (3.6) (3.6)
Net additions of own shares by ESOP Trusts (38.4) (16.2) (29.0)
Transfer to goodwill - - (5.1)
Non-cash share-based incentive plans
(including share options) 37.9 30.3 68.6
Tax benefit of share-based payments 10.1 3.5 12.9
Actuarial loss on defined benefit schemes - - (16.5)
Deferred tax on defined benefit pension
schemes - - 3.6
Exchange adjustments on foreign currency net
investments (210.9) 141.7 266.1
Other movements 0.8 - -
Revaluation of other investments 2.7 15.8 21.0
Recognition of financial instruments during
the period (2.3) 21.7 (27.6)
----------------------------------------------------------------------
Net (deductions)/additions to equity share
owners' funds (174.9) 728.9 955.5
Opening equity share owners' funds 3,904.5 2,949.0 2,949.0
----------------------------------------------------------------------
Closing equity share owners' funds 3,729.6 3,677.9 3,904.5
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
17. Non-GAAP measures of performance
Reconciliation of profit before interest and taxation to
Headline PBIT for the six months ended 30 June 2006
Six months Six months Year
ended ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Profit before interest and taxation 333.2 266.3 686.7
Amortisation of acquired intangible
assets 23.0 11.8 25.3
Goodwill impairment 10.0 20.5 46.0
Goodwill write-down relating to
utilisation of pre-acquisition tax
losses 3.0 1.0 1.1
Gains on disposal of investments (4.2) - (4.3)
Share of exceptional gains of associates (4.0) - -
----------------------------------------------------------------------
Headline PBIT 361.0 299.6 754.8
----------------------------------------------------------------------
Finance income 51.0 36.8 87.6
Finance charges (excluding revaluation
of financial instruments) (95.9) (81.6) (173.4)
----------------------------------------------------------------------
(44.9) (44.8 (85.8)
----------------------------------------------------------------------
Interest cover on Headline PBIT 8.0 times 6.7 times 8.8 times
----------------------------------------------------------------------
Calculation of Headline EBITDA
Six months Six months Year
ended ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Headline PBIT (as above) 361.0 299.6 754.8
Depreciation of property, plant and
equipment 60.8 46.0 111.4
Amortisation of other intangible assets 6.1 5.0 10.7
----------------------------------------------------------------------
Headline EBITDA 427.9 350.6 876.9
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
17. Non-GAAP measures of performance (continued)
Reconciliation of profit before taxation to Headline PBT
and Headline earnings for the six months ended 30 June 2006
Year
Six months Six months ended
ended ended 31
30 June 30 June December
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Profit before taxation 287.1 221.5 592.0
Amortisation of acquired intangibles 23.0 11.8 25.3
Goodwill impairment 10.0 20.5 46.0
Goodwill write-down relating to
utilisation of pre-acquisition tax
losses 3.0 1.0 1.1
Gains on disposal of investments (4.2) - (4.3)
Share of exceptional gains of associates (4.0) - -
Revaluation of financial instruments 1.2 - 8.9
----------------------------------------------------------------------
Headline PBT 316.1 254.8 669.0
Taxation (91.7) (72.6) (194.0)
Minority interests (18.7) (13.5) (34.1)
----------------------------------------------------------------------
Headline earnings 205.7 168.7 440.9
----------------------------------------------------------------------
Ordinary dividends 76.1 62.6 100.2
----------------------------------------------------------------------
Dividend cover on Headline earnings 2.7 times 2.7 times 4.4 times
----------------------------------------------------------------------
Headline PBIT margins before and after share of results of associates
Six months Six months
ended ended
Margin 30 June Margin 30 June
(%) 2006 (%) 2005
----------------------------------------------------------------------
GBP m GBP m
Revenue 2,864.4 2,467.5
Headline PBIT 12.6% 361.0 12.1% 299.6
----------------------------------------------------------------------
Share of results of associates
(excluding exceptional gains) 21.3 13.7
----------------------------------------------------------------------
Headline PBIT excluding share of
results of associates 11.9% 339.7 11.6% 285.9
----------------------------------------------------------------------
WPP GROUP PLC
Notes to the unaudited consolidated interim financial statements
(Notes 1 - 17) (continued)
17. Non-GAAP measures of performance (continued)
Reconciliation of free cash flow for the six months ended 30 June 2006
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec.
2006 2005 2005
----------------------------------------------------------------------
GBP m GBP m GBP m
Cash generated by operations 68.9 49.3 1,020.3
Plus:
Interest received 39.5 27.5 62.4
Investment income - - 5.6
Dividends received from associates 11.0 9.5 13.4
Issue of shares 49.5 15.8 20.3
Proceeds on disposal of property, plant
and equipment 4.8 2.1 6.7
Gains on disposal of investments 4.2 - 4.3
Gains/(losses) on sale of property,
plant and equipment 0.2 - (1.1)
Movements in working capital and
provisions 375.4 317.9 (107.6)
Less:
Interest and similar charges (76.9) (63.0) (128.2)
Purchases of property, plant and
equipment (66.6) (68.1) (160.5)
Purchases of other intangible assets
(including capitalised computer
software) (6.9) (2.1) (10.8)
Corporation and overseas tax paid (69.3) (57.3) (136.0)
Dividends paid to minority shareholders
in subsidiary undertakings (15.3) (14.3) (24.0)
----------------------------------------------------------------------
Free Cash Flow 318.5 217.3 564.8
----------------------------------------------------------------------
INDEPENDENT REVIEW REPORT TO WPP GROUP PLC
Introduction
We have been instructed by the company to review the financial
information for the six months ended 30 June 2006 which comprise the
consolidated income statement, the consolidated balance sheet, the
consolidated statement of recognised income and expense, the
consolidated cash flow statement and related notes 1 to 17. We have
read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with
Bulletin 1999/4 issued by the Auditing Practices Board. Our work has
been undertaken so that we might state to the company those matters we
are required to state to them in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for
our review work, for this report, or for the conclusions we have
formed.
Directors' responsibilities
The interim report, including the financial information contained
therein, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim
report in accordance with the Listing Rules of the Financial Services
Authority which require that the accounting policies and presentation
applied to the interim figures are consistent with those applied in
preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained
in Bulletin 1999/4 issued by the Auditing Practices Board for use in
the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the
financial information and underlying financial data and, based
thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification
of assets, liabilities and transactions. It is substantially less in
scope than an audit performed in accordance with International
Standards on Auditing (UK and Ireland) and therefore provides a lower
level of assurance than an audit. Accordingly, we do not express an
audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information as
presented for the six months ended 30 June 2006.
Deloitte & Touche LLP
London
Chartered Accountants
17 August 2006
WPP GROUP PLC
GLOSSARY AND BASIS OF PREPARATION
Average net debt
Average net debt is calculated as the average daily net bank
borrowings of the Group, derived from the Group's automated banking
system. Net debt at a 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 budgeted 2006
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 budgets, which
may not necessarily result in actual billings of the same amount.
Free cash flow
Free cash flow is calculated as Headline operating profit before
depreciation of property, plant and equipment and amortisation of
other intangible assets, including dividends received from associates,
interest received, investment income received, proceeds from the issue
of shares, and proceeds from the disposal of property, plant and
equipment, less corporation and overseas tax paid, interest and
similar charges paid, dividends paid to minority shareholders in
subsidiary undertakings, purchases of property, plant and equipment
and purchases of other intangible assets.
Headline earnings
Headline PBT less taxation and minority interests.
Headline operating profit / Headline PBIT
Profit before finance income/costs, taxation, investment gains,
goodwill impairment and other goodwill write-downs, amortisation of
acquired intangible assets, and share of exceptional gains of
associates.
Headline PBT
Profit before taxation, investment gains, goodwill impairment and
other goodwill write-downs, amortisation of acquired intangible
assets, share of exceptional gains of associates and gains/losses
arising from the revaluation of financial instruments.
Operating margin
Headline operating profit as a percentage of revenue.
Pro forma ('like-for-like')
Pro forma comparisons are calculated as follows: current year,
constant currency actual results (which include acquisitions from the
relevant date of completion) are compared with prior year, constant
currency 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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