WPP 2006 Preliminary Results.Billings up 13% to $55.5 billion ([pounds sterling]30.1 billion) Reported revenue up almost 10% to $10.9 billion ([pounds sterling]5.9 billion) Like-for-like revenue up 5.4% 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 14.5% 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 crosses $1.8 billion ([pounds sterling]1 billion) for first time 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. before interest and tax up almost 14% to $1,583 million ([pounds sterling]859 million) Headline Profit before tax up over 14% to $1,412 million ([pounds sterling]766 million) Profit before tax up over 15% to $1,257 million ([pounds sterling]682 million) 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 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 almost 17% at 77.4o (42.0p) Final dividend up 20% to 14.03o (7.61p) per share 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 -- 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) today reported its 2006 Preliminary Results. * Billings up 13.0% to $55.556 billion ([pounds sterling]30.141 billion). * Revenue up 9.9% to $10.890 billion ([pounds sterling]5.908 billion). * Like-for-like revenue up 5.4%. * Second half like-for-like revenue growth accelerates to 5.7% and quarter four to 7.2%. * Headline operating profits before interest and tax up 13.8% to $1,583.3 million ([pounds sterling]859.0 million) from $1,391.2 million ([pounds sterling]754.8 million). * Operating margin up 0.5 margin points to 14.5% from 14.0%. * Headline profits before tax up 14.5% to $1,412.4 million ([pounds sterling]766.3 million) from $1,233.1 million ([pounds sterling]669.0 million). * Profit before tax up 15.2% to $1,257.1 million ([pounds sterling]682.0 million) from $1,091.2 million ([pounds sterling]592.0 million). * Diluted headline earnings per share up 16.7% to 77.4o (42.0p) from 66.4o (36.0p). * 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 18.5% to 64.9o (35.2p) from 54.7o (29.7p). * Final dividend up 20% to 14.03o (7.61p) per share making a total for the year of 20.66o (11.21p) up 20% over 2005. * Average net debt up $237 million ([pounds sterling]121 million) to $2,376 million ([pounds sterling]1,214 million) from $2,139 million ([pounds sterling]1,093 million) (at 2006 exchange rates). * Estimated net new billings of over $6.411 billion ([pounds sterling]3.562 billion). * Operating margin targets of 15.5% and 16.0% set for 2008 and 2009. * Target percentage for rolling share-buyback programme increased to 4-5% of share capital for 2007 and 2008. In this press release not all of the figures and ratios used are readily available from the unaudited preliminary results included in Appendix 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 2006, the Group's twenty-first year. These record results again reflect the continued steady strength of the world economy positively impacting almost all disciplines and geographies and the strength of the Group's operating brands and franchise. Billings were up 13.0% at around $55 billion ([pounds sterling]30.141 billion). Reportable revenue was up 9.9% to $10.890 billion ([pounds sterling]5.908 billion). Revenue, including 100% of associates, is estimated to total over $12.921 billion ([pounds sterling]7.010 billion). On a constant currency basis, revenue was up 10.9% and gross margin up 10.3%. Like-for-like revenues, excluding the impact of acquisitions and on a constant currency basis, were up 5.4%. On the same basis, gross margin was up 5.7%. Like-for-like revenues were up 5.0% in the first half of 2006 and up 5.7% in the second half, continuing the strong organic growth of 5.5% in 2005, with the fourth quarter of 2006, accelerating to 7.2%. The fourth quarter was the Company's first $3 billion revenue quarter. 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") was up 14.2% to $1.847 billion ([pounds sterling]1.002 billion) and up 16.0% in constant currencies. Headline operating profit was up 13.8% to $1,583 million ([pounds sterling]859 million) and up 15.7% in constant currencies. Reported operating costs operating costs npl → gastos mpl operacionales together with 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 of acquired intangibles and profits on disposal of fixed asset investments), rose by 9.3% and by 10.1% in constant currency. Like-for-like total operating and direct costs rose 4.3%. Reported staff costs, excluding incentives (which includes the cost of share-based compensation), were up 9.1%. Incentive payments (including the cost of share-based compensation) totalled $455.1 million ([pounds sterling]246.9 million) ($419.5 million ([pounds sterling]227.6 million) in 2005), an increase of 8.4%, which represents 23.1% (24.0% in 2005) of headline operating profit before bonuses, taxes and income from associates. Before these incentive payments, operating margins increased by 0.4 margin points to 18.7% from 18.3%. On a reported basis, the Group's staff cost to revenue ratio improved 0.5 margin points to 58.8% compared with 59.3% in 2005. 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 in revenues. Through the 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. upswing Upswing An upward turn in a security's price after a period of falling prices. of the 1990s, 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 UK GAAP United Kingdom Generally Accepted Accounting Principles ). 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 slightly by 0.4 percentage points, to 12.8% (under IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System - which includes 1.0 percentage points attributable to share-based compensation), but in 2006 the ratio strengthened again to 13.0%. The number of people in the Group averaged 77,686 against 70,936 in 2005, an increase of 9.5%. On a like-for-like basis, average headcount was up to 77,686 from 74,971, an increase of 3.6%. At the end of 2006, staff numbers were 79,352 compared with 76,532 at the end of 2005 on a like-for-like basis, an increase of 3.7%. 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 $170.9 million ([pounds sterling]92.7 million) up from $158.1 million ([pounds sterling]85.8 million) last year, an increase of $12.7 million ([pounds sterling]6.9 million), largely reflecting higher interest rates, offset by the impact of improved liquidity as a result of a reduction in average working capital. Headline operating profit or profit pre-goodwill impairment, amortisation of acquired intangibles, interest, tax and investment gains and write-downs was up 13.8% to $1,583.3 million ([pounds sterling]859.0 million) from $1,391.2 million ([pounds sterling]754.8 million) and up 15.7% in constant currencies. Reported profit before interest and tax was up 14.0% to $1,442.7 million ([pounds sterling]782.7 million) from $1,265.7 million ([pounds sterling]686.7 million) and up 15.9% 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 14.5% to $1,412.4 million ([pounds sterling]766.3 million) from $1,233.1 million ([pounds sterling]669.0 million) and up 16.8% in constant currencies. Reported headline operating margin (including income from associates) increased 0.5 margin points to a record 14.5% from 14.0%, in line with the revised target set in February 2006. Reported profit before tax rose by 15.2% to $1,257.1 million ([pounds sterling]682.0 million), and by 17.6% in constant currencies. The Group's tax rate on headline profits was 26.0%, a reduction of 3.0 percentage points over 2005. This reflects 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, particularly in relation to Grey which had a tax rate on acquisition in excess of 45%. Diluted headline earnings per share were up 16.7% at 77.4o (42.0p). In constant currency, earnings per share on the same basis were up 18.9%. Diluted earnings per share rose by 18.5% to 64.9o (35.2p) and by 21.0% in constant currencies. The Board recommends an increase of 20% in the final dividend to 14.03o (7.61p) per share, making a total of 20.66o (11.21p) per share for 2006, a 20% increase over 2005. The record date for this dividend is 8 June 2007, payable on 9 July 2007. The dividend paid in 2006 is over four times covered by headline earnings. Further details of WPP's financial performance are provided in Appendix I. 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 geographical region, 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). , picking up in the second half. 2006, a mid-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 strong, to
some extent reflecting the positive impact of events such as the winter
Olympics in Turin, 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 in Germany and the mid-term congressionals 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. . Three geographical growth speeds remain though - fastest growth 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 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. ; a surprisingly steady speed in the United States; and a slower speed in Western Europe. 2006 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 continued high levels of new business activity. 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. By 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 reflected the first time inclusion of Grey Worldwide and MediaCom. In 2006, the underlying relative strength of the inaptly named "below-the-line" services re-asserted itself, as marketing services grew to 52.5% of revenues. In addition, in 2006, our narrowly defined internet-related revenue was almost $1 billion or over 9% of our worldwide reported revenue. This is more than the 6-7% for on-line media's share of total advertising spend both in the United States and 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 2006 as well as proportions of operating profits: [TABLE OMITTED] The United States continues to surprise positively, with like-for-like growth of 4.6%, up slightly on the first half. Latin America remained 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 remained strong across the region, with Mainland China and India fastest growing, 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 19% respectively. 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. , although relatively more difficult, improved slightly in the second half. The United Kingdom was stronger in the latter half of the year, reflecting some improvement in the media economy, particularly in the fourth quarter. As seen in the first half, rates of growth in Europe continue to be two-paced, with Western Continental Europe remaining softer and Central and Eastern Europe, Russia and the other 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. . Of the big five Western European markets, Spain remains a standout growth market, although the United Kingdom, France, Germany and Italy all began to show some renewed signs of life. Estimated net new billings of $6.411 billion ([pounds sterling]3.562 billion) were won last year, reflecting in part strong media investment management new business. The Group was ranked second in the two major new business surveys for 2006. 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 2006 (on a constant currency basis including the impact of acquisitions) as well as proportions of operating profits: [TABLE OMITTED] Media investment management continued to show the strongest growth of all our communications services sectors, along with direct, internet and interactive and specialist communications. Direct and digitally-related activities now account for over 20% of the Group's revenues, which are running at the rate of over $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. The new technologies have demonstrated the power of editorial publicity through fast-growing new applications of new technology such as MySpace, YouTube, Facebook, Flickr and Second Life. Media investment management and information, insight & consultancy combined, grew by 10% in the year on a like-for-like basis, well ahead of independent competitors. Advertising and Media Investment Management In constant currencies, advertising and media investment management revenue grew by over 8%. Like-for-like revenue growth was over 4%. The combined operating margin of this sector is almost 16%. In 2006, Ogilvy & Mather Worldwide generated estimated net new billings of $336 million ([pounds sterling]187 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 $279 million ([pounds sterling]155 million), Y&R Advertising $200 million ([pounds sterling]111 million) and Grey Worldwide $235 million ([pounds sterling]130 million). Also in 2006, GroupM, the Group's media investment management company, which includes MindShare, Mediaedge:cia, MediaCom and MAXUS generated estimated net new billings of $4.361 billion ([pounds sterling]2.423 billion). The Group was ranked first and second respectively in the Gunn Report awards rankings for media and creative in 2006. Information, Insight and Consultancy On a constant currency basis information, insight and consultancy revenues grew over 11%, with like-for-like revenues up over 4%. Gross margin grew by over 6% on a like-for-like basis. Overall margins improved by 0.9 margin points to 11.1%. 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. (Millward Brown, 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 and Dynamic Logic in the United States, IMS (1) See IP Multimedia Subsystem. (2) (Information Management System) An early IBM hierarchical DBMS for IBM mainframes. IMS was widely implemented throughout the 1970s under MVS and continues to be used under z/OS. in Ireland, MFR MFR, n See myofascial release. in France, Germany, Hungary, Turkey, Impact in 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. , ACSR ACSR Accredited Customer Service Representative ACSR Aluminum Conductor, Steel Reinforced (cable) ACSR Avid Certified Support Representative ACSR Advisory Committee on Shareholder Responsibility ACSR Algebra of Communicating Shared Resources in China, Japan, Korea, Mexico, Brazil and Colombia); 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 Belgium, Germany, Spain, SIFO in Sweden Poland, South Africa, Mexico, China, Malaysia, Indonesia, Singapore and Australia); 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 the United Kingdom; Icon Added Value Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:
BPRI Business Planning & Research International (UK) in the United Kingdom and Glendinning in the United States and the United Kingdom. Public Relations and Public Affairs Public relations and public affairs continued its strong growth with constant currency growth of over 12% and like-for-like growth of almost 6%. Particularly strong were Ogilvy Public Relations Worldwide, Hill & Knowlton, Burson-Marsteller, Cohn & Wolfe, Finsbury and Buchanan. Operating margins continued to improve and are now over 15.0%, an improvement of 1.1 margin points over the previous year. Branding and Identity, Healthcare and Specialist Communications The Group's branding and identity, healthcare and specialist communications revenues rose by over 14%. Like-for-like revenues rose by almost 8%. Operating margins were up 0.6 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 New York and Chicago in the United States, Germany, Spain, Dubai, Japan, Greater China and Australia; Enterprise IG in the United States, the United Kingdom, France and Brindfors in Sweden; Fitch in Phoenix and Columbus in the United States, the United Kingdom and Qatar. * in healthcare - Sudler & Hennessey in New York and HealthAnswers Education in the United States Education in the United States is provided mainly by government, with control and funding coming from three levels: federal, state, and local. School attendance is mandatory and nearly universal at the elementary and high school levels (often known outside the United States as the , Transart in the United Kingdom, Germany, Italy, Sydney in Australia and India; Grey Healthcare Group in the United States, the United Kingdom, France and Germany; in Ogilvy Healthworld in the United States, Canada, France, Italy and the Netherlands, Mexico and Australia. * in promotion and direct marketing - OgilvyOne (in New York, Minneapolis, 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 , Leopard and Neo@Ogilvy in the United States, Canada, Germany, France, the Netherlands, Portugal, Italy, Brazil, Argentina, Malaysia, Singapore, Greater China, India and Korea); 141 Worldwide (in Boomerang in the United States, the United Kingdom, Chile, Japan, Malaysia and the Philippines); Wunderman (in Seattle, RTC See real time clock. , KBM (Knowledge Based Manufacturing) A full-featured custom manufacturing ERP system from Acacia for the AS/400. It was originally developed by Data3, which was acquired by the ASK Group and then by Computer Associates (CA) in 1994. See Acacia. , Fortelligent, Studiocom and ZAAZ in the United States, Canada, Burrows Burrows is a provincial electoral division in the Canadian province of Manitoba. It was created by redistribution in 1957, and formally came into existence in the provincial election of 1958. The riding is located in the northern part of Winnipeg. and Good Technology in the United Kingdom, Greece, South Africa, Argentina, Chile and Brazil); RMG Connect RMG Connect is the relationship marketing division of JWT, developing solutions both online and offline in direct marketing, interactive marketing and sales promotion. RMG Connect currently has more than 750 employees in 25 countries and 41 offices. (in Canada, France, Italy, Spain, Germany, Brazil, Mexico, India and Singapore); G2 (in the United States, MDS MDS, n See temporomandibular pain-dysfunction syndrome. MDS 1 Maternal deprivation syndrome, see there 2 Myelodysplastic syndrome, see there in the United Kingdom, France, Denmark, Sweden, Brazil, Argentina, Colombia and Korea). * in 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. , Bridge, MJM MJM Multi-Jet Modeling (prototyping manufacturing) MJM Metropolitan Japanese Ministry MJM Married Jewish Male , Pace and The Food Group in the United States, 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 , the Forward Group, Mando, BDGworkfutures, Dovetail dovetail (dov´tāl), n a widened or fanned-out portion of a prepared cavity, usually established deliberately to increase the retention and resistance form. and Headcount in the United Kingdom and Global Sportnet in Germany. Manufacturing Revenues and profits at the Group's manufacturing division were down in 2006. Balance sheet and cash flow The unaudited preliminary Group 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 2006 is attached in Appendix I. As at 31 December 2006, the Group's net debt increased slightly to $1,595 million ([pounds sterling]815 million) compared with $1,573 million ([pounds sterling]804 million) at 31 December 2005. Net debt averaged $2,376 million ([pounds sterling]1,214 million) in 2006, flat against 2005 (up $237 million ([pounds sterling]121 million) at 2006 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 $18.6 billion ([pounds sterling]9.5 billion), giving a total enterprise value of approximately $20.5 billion ([pounds sterling]10.5 billion), market values which lead the industry. 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 2006, 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 $1,646 million ([pounds sterling]893 million), capital expenditure $341 million ([pounds sterling]185 million), depreciation $264 million ([pounds sterling]143 million), tax paid $299 million ([pounds sterling]162 million), interest and similar charges paid $107 million ([pounds sterling]58 million) and other net cash inflows of $157 million ([pounds sterling]85 million). Free cash flow available for debt repayment, acquisitions, share buybacks and dividends was therefore $1,320 million ([pounds sterling]716 million). This free cash flow was partially absorbed by $398 million ([pounds sterling]216 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 $476 million ([pounds sterling]258 million) and dividends of $219 million ([pounds sterling]119 million). This resulted in a net inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of $227 million ([pounds sterling]123 million), well in excess of the objective introduced in 2003 of covering outgoings by free cash flow. An unaudited consolidated cash flow statement is included in Appendix I. In the first seven weeks of 2007, up until 16 February, the last date for which information is available prior to this announcement, net debt averaged $1,669 million ([pounds sterling]853 million) down $313 million ([pounds sterling]160 million) versus $1,982 million ([pounds sterling]1,013 million) for the same period last year at 2007 exchange rates. Your Board continues to examine ways of deploying its EBITDA of over $1.9 billion (over [pounds sterling]1 billion) and substantial cash flow of over $1.3 billion or over [pounds sterling]700 million per annum to enhance share owner value. As necessary capital expenditure, spent mainly on information technology and property, is expected to remain approximately equal to the depreciation charge in the long-term, the Company has concentrated on examining potential acquisitions and on returning excess capital to share owners in the form of dividends and/or share buy-backs. In 2006, the Group continued to make small to medium-sized acquisitions and/or investments in high growth geographical or functional areas. The net initial cost of all acquisitions was $206 million ([pounds sterling]112 million) in cash, in advertising and media investment management in the United States, the United Kingdom, the Netherlands, Germany, South Africa, Israel, China, Singapore, 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. and Brazil; in information, insight & consultancy in the United States, Spain, Argentina, 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. and China; in public relations & public affairs in the United States, Canada and India; in branding and identity in India; in healthcare in the United States, the Netherlands, Spain and Switzerland and in direct, internet & interactive in the United States, Germany, China and Korea. As outlined in the Group's 2006 Interim Announcement, the Group carried out a review of its share repurchase programme earlier in 2006 with the aim of increasing the buy-back of shares to 2-3% of its share capital each year, as compared with 1-2% historically. Consistent with this objective, in 2006, 38.874 million ordinary shares were purchased, equivalent to 3.1% of the share capital, including 5.717 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 $12.24 ([pounds sterling]6.64) per share and total cost of $475.9 million ([pounds sterling]258.2 million). Of these shares, 33.157 million were purchased in the market and subsequently cancelled. 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. Following a further recent review of the Company's capital structure with its financial advisers, your Board has decided to further increase the target percentage for rolling share buy-backs on the open market, from 2-3% of its share capital each year, or approximately $350-550 million ([pounds sterling]200-300 million), to 4-5%, or approximately $750-950 million ([pounds sterling]400-500 million) in each of 2007 and 2008, when market conditions are appropriate. As noted above, your Board has also decided to increase the final dividend by 20% to 14.03o (7.61p) per share, taking the full year dividend to 20.66o (11.21p) per share. Developments in 2006 and 2007 Including associates, the Group had over 98,000 full-time people in over 2,000 offices in 106 countries at the year end. It services over 340 of the Fortune Global 500 companies, over one-half of the Nasdaq 100, over 30 of the Fortune e-50, and approximately 400 national or multi-national clients in three or more disciplines. More than 280 clients are served in four disciplines and these clients account for over 57% of Group revenues. The Group also works with nearly 230 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 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 2006, after the recovery in both 2003 and 2004, driven by the United States, Asia Pacific, Latin America, the Middle East, Russia and the other CIS countries. As a result, your Company has performed at record levels. In addition, Africa also showed significant signs of growth, no doubt stimulated by Chinese interest CHINESE INTEREST. Interest for money charged in China. In a case where a note was given in China, payable eighteen mouths after date, without, any stipulation respecting interest, the court allowed the Chinese interest of one per cent. per month, from the expiration of the eighteen months. and investment and is becoming a continent of opportunity. The FIFA World Cup in South Africa in 2010 will have a significant impact in focusing further attention on the African continent. 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- and post-incentive levels have improved. 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 2007 and beyond. The task of improving property utilisation continues to be a priority with a portfolio of approximately 18.4 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. In 2006 further improvements were made and this ratio reduced slightly to 7.1%. As usual, the budgets for 2007 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 4.0-4.5%, 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 have only preliminary data for January in 2007 and this shows like-for-like revenues up over 4%. Worldwide economic conditions seem set to continue to show steady growth in 2007, 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, again look good, 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 other CIS countries, even Western Continental Europe may continue the improvement seen in the second half of 2006 together with the United Kingdom, where growth in the second half of 2006 was almost double that of the first half. 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 Olympics in 2008, which, as a maxi-quadrennial year, should be a very strong one, buoyed by heavy United States political advertising as the multiple candidates slug it out and by the European Football Championships. In the short-term, growth in advertising and marketing services expenditure may remain in low to medium single digit 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 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 clients' 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. 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, the need to influence distribution, and the new focus on
corporate responsibility issues such as climate change, underpin the
need for our clients to continue to differentiate their products and
services both tangibly and intangibly. Moreover, the continuing growth
of BRICs (Brazil, Russia, India and China) and other faster-growing
geographical markets, will add significant opportunities in Asia
Pacific, Latin America, Africa and the Middle East and Central and
Eastern Europe - along with the growth of "new-BRICs" such as
Vietnam, Pakistan, Indonesia and Bangladesh. Advertising and marketing
services expenditure as a proportion of gross national product should
resume its growth and burst 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 on the 2004 to 2006 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 2007 will again focus more on operating profit growth than historically, in order to stimulate top-line growth, although objectives will continue to include operating margin improvement, improvement in staff costs to revenue ratios and qualitative 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, there is no reason to believe that the Group cannot achieve the revised targets now being set with the announcement of these record results, to achieve margins of 15.5% in 2008 and 16.0% in 2009. Budgets for 2007 include the operating margin target of 15.0% previously set for 2007. Neither is there any reason why operating margins could not be improved beyond these levels by continuing 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 continue 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 and telecommunications. And finally, some thoughts on size O Companies can get very confused. When companies start out, investors and financial commentators often express concern about their lack of scale; about their ability to take on more established competition and survive the inevitable cyclical downturns. It seems that companies can be too small. Twenty years TWENTY YEARS. The lapse of twenty years raises a presumption of certain facts, and after such a time, the party against whom the presumption has been raised, will be required to prove a negative to establish his rights. 2. or so later, when those same companies have prospered, investors and financial commentators often express concern about their size; about their ability to respond with speed to new challenges; about the diminishing share of markets still available to them. It seems that companies can be too big. That's why we need to look beneath the figures in this announcement at the reality of how they were derived. WPP is no single, monolithic Single object. Self contained. One unit. entity. WPP has some 100 different companies, each with its own specialist skills, each staffed by its own committed professionals. The biggest of these companies employs 15,174 people; the smallest, 17. They all operate between them in 106 countries. The figures we report today are the sum of the painstaking pains·tak·ing adj. Marked by or requiring great pains; very careful and diligent. See Synonyms at meticulous. n. Extremely careful and diligent work or effort. work of 98,000 talented individuals working for all of those 100 or so WPP companies and associates around the world. In the course of 2006, they undertook many tens of thousands of totally separate projects: some ongoing and substantial; some providing fast and inventive in·ven·tive adj. 1. Of, relating to, or characterized by invention. 2. Adept or skillful at inventing; creative. in·ven solutions to immediate problems. And all were won against open and highly respected competition. That is the reality behind our figures and it gives us great satisfaction to register the fact; and above all, publicly to recognise the individual brains and talents of those many thousands of men and women who made those figures possible. We thank them all for another record year; and wish them every success in the year ahead. It should be another good one. 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.
[TABLE OMITTED]
[TABLE OMITTED]
[TABLE OMITTED]
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
1. Basis of accounting The unaudited preliminary 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 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 the recognition and measurement criteria of 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), 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. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company's 2006 Annual Report and Accounts will be prepared in compliance with IFRS. Statutory Information The financial information for the years ended 31 December 2006 and 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 The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. 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 2006 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 2006 has yet to be signed. The announcement of the preliminary results was approved by the board of directors on 22 February 2007. 3. Currency conversion The 2006 unaudited preliminary consolidated income statement consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. is prepared using, among other currencies, an average exchange rate of US$1.8432 to the pound (2005: US$1.8189). The unaudited preliminary consolidated balance sheet as at 31 December 2006 has been prepared using the exchange rate on that day of US$1.9569 to the pound (2005: US$1.7187). The basis for calculating the constant currency percentage changes, shown on the face of the unaudited preliminary consolidated income statement, is described in the glossary A term used by Microsoft Word and adopted by other word processors for the list of shorthand, keyboard macros created by a particular user. See glossaries in this publication and The Computer 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: [TABLE OMITTED] The goodwill impairment charge of [pounds sterling]35.5 million (2005: [pounds sterling]46.0 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 Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of goodwill. Operating profit includes credits totalling [pounds sterling]10.6 million (2005: [pounds sterling]10.1 million) relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the release of excess provisions and other balances established in respect of acquisitions completed prior to 2005. Share of results of associates include:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Share of profit before interest and taxation > > 61.4
54.0
Share of exceptional gains > > 4.0
-
Share of interest and minority interest > > 0.9
(0.9)
Share of taxation > > (25.2)
(19.2)
> > 41.1
33.9
Share of exceptional gains of [pounds sterling]4.0 million in the year ended 31 December 2006 represents the Group's share of negative goodwill recognised in the income statements of its associate undertakings during the year.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
5. Finance income and finance costs Finance income includes:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Expected return on pension scheme assets > > 25.2
24.2
Investment income > > 5.7
5.6
Interest income > > 80.1
57.8
> > 111-
87.6
Finance costs include: [TABLE OMITTED] The following are included in the revaluation of financial instruments shown above:
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
6. Segmental segmental /seg·men·tal/ (seg-men´t'l) 1. pertaining to or forming a segment or a product of division, especially into serially arranged or nearly equal parts. 2. undergoing segmentation. analysis Reported contributions by operating sector were as follows:
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
6. Segmental analysis (continued) Reported contributions by geographical area were as follows:
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
7. Taxation The Group tax rate on Headline PBT PBT Provider Backbone Transport (networking technology adding determinism to ethernet) PBT Polybutylene Terephthalate PBT Profit Before Tax PBT Paper Based Test (education) 1 is 26.0% (2005: 29.0%). The Group tax rate on Reported PBT is 29.2% (2005: 32.8%). The tax charge comprises:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Current tax > >
UK Corporation tax at 30% > >
Current year > > 36.6
32.9
Prior years > > (44.9)
(24.4)
> > (8.3)
8.5
Foreign tax > >
Current year > > 216.9
177.3
Prior years > > (7.6)
9.9
> > 209.3
187.2
Total Current tax > > 201.0
195.7
Deferred tax > >
Current year > > (1.6)
(1.7)
Tax expense > > 199.4
194.0
1 Headline PBT is defined in note 18. > >
8. Ordinary dividends The Board has recommended a final dividend of 7.61p (2005: 6.34p) per ordinary share in addition to the interim dividend paid of 3.60p (2005: 3.00p) per ordinary share. This makes a total for the year of 11.21p (2005: 9.34p) per ordinary share, an increase of 20%. The final dividend is expected to be paid on 9 July 2007 to share owners on the register at 8 June 2007.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
9. Earnings per share Basic EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. The calculation of basic Reported and Headline EPS is as follows: [TABLE OMITTED] Diluted EPS The calculation of diluted Reported and Headline EPS is set out below: [TABLE OMITTED] Diluted EPS has been calculated based on the Reported and Headline Earnings amounts above. For the year ended 31 December 2006, the $150 million Grey convertible bonds were dilutive to earnings whilst the [pounds sterling]450 million convertible bonds were accretive. Earnings for the purposes of this calculation consequently included an additional [pounds sterling]1.1 million in 2006. In 2005, both convertibles 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: [TABLE OMITTED] At 31 December 2006 there were 1,240,605,187 (2005: 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 an·a·lyse v. Chiefly British Variant of analyze. analyse or US -lyze Verb [-lysing, -lysed] or -lyzing, the items included within the main cash flow headings on page 13: Net cash inflow from operating activities: [TABLE OMITTED] Acquisitions and disposals:
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
10. Analysis of cash flows (continued) Share repurchases and buybacks: [TABLE OMITTED] Net increase/(decrease) in borrowings: [TABLE OMITTED] Cash and cash equivalents: [TABLE OMITTED] 11. Net debt
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
12. Goodwill and acquisitions Goodwill in relation to subsidiary undertakings decreased by [pounds sterling]240.7 million (2005: increased by [pounds sterling]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 and the effect of currency translation. Goodwill in relation to associate undertakings decreased by [pounds sterling]76.0 million (2005: increased by [pounds sterling]79.1 million) in the year. Future anticipated payments to vendors in respect of both deferred and earnout obligations totalled [pounds sterling]235.5 million (2005: [pounds sterling]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 operating company A business that engages in transactions with outsiders. improve profits in line with directors' estimates. The contribution to revenue and operating profit of acquisitions completed in 2006 was not material. 13. Other intangible assets The following are included in other intangibles: [TABLE OMITTED] 14. Trade and other receivables Amounts falling due within one year:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Trade receivables > > 4,021.4
3,999.3
VAT and sales taxes recoverable > > 50.0
43.0
Other debtors > > 438.4
350.8
Prepayments and accrued income > > 422.1
381.4
> > 4,931.9
4,774.5
Amounts falling due after more than one year:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Other debtors > > 106.6
115.8
Prepayments and accrued income > > 3.7
26.3
> > 110.3
142.1
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
15. Trade and other payables: amounts falling due within one year The following are included in trade and other payables falling due within one year: [TABLE OMITTED] 16. 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: [TABLE OMITTED] The following table sets out the directors' best estimates of future deferred and earnout related obligations:
> > 2006
2005
> > [pounds sterling]m
[pounds sterling]m
Within one year > > 87.9
81.3
Between 1 and 2 years > > 36.1
71.9
Between 2 and 3 years > > 34.6
14.7
Between 3 and 4 years > > 49.1
20.3
Between 4 and 5 years > > 27.8
31.8
Over 5 years > > -
-
> > 235.5
220.0
The Group does not consider there to be any material contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. as at 31 December 2006.
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
17. Reconciliation of movements in consolidated equity share owners' funds
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
18. Non-GAAP measures of performance
[TABLE OMITTED]
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
18. Non-GAAP measures of performance (continued)
[TABLE OMITTED]
[TABLE OMITTED]
WPP GROUP PLC
Notes to the unaudited preliminary consolidated financial statements
(continued)
18. Non-GAAP measures of performance (continued)
[TABLE OMITTED]
WPP GROUP PLC
GLOSSARY AND BASIS OF PREPARATION
2004 UK GAAP 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 ('UK GAAP') 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 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. Billings and estimated net new billings Billings comprises the gross amounts billed to clients in respect of commission-based / fee-based income together with the total of other fees earned. Net new billings represent the estimated annualised impact on billings 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. 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. 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 and impairment 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 and impairment 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 As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase 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 com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. period in the prior year. The Group uses the terms 'pro forma' and 'like-for-like' interchangeably INTERCHANGEABLY. Formerly when deeds of land were made, where there Were covenants to be performed on both sides, it was usual to make two deeds exactly similar to each other, and to exchange them; in the attesting clause, the words, In witness whereof the parties have hereunto . |
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