WPP 2007 Interim Results.Billings up almost 5% at PS15.085 billion Reported revenue up 2% to PS2.921 billion and up almost 8% in constant currencies Like-for-like revenue up over 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 6% to PS383 million and up over 12% in constant currencies 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 13.1% Headline profit before tax up almost 7% to PS338 million and up almost 14% in constant currencies Profit before tax up over 2% to PS294 million and up almost 9% 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 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 9% at 18.2p and up almost 19% in constant currencies Interim ordinary dividend up 20% to 4.32p 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 2007 Interim Results. * Billings up almost 5% at PS15.085 billion. * Reported revenue up 2.0% to PS2.921 billion and up almost 8% in constant currencies. * Like-for-like revenue up 5.3%, gross margin up 5.7%. * Headline operating profit up 6.1% to PS383.1 million from PS361.0 million and up over 12% in constant currencies. * Headline operating margin up 0.5 margin points to 13.1%. * Headline profit before tax up 6.9% to PS338.0 million from PS316.1 million and up almost 14% in constant currencies. * Profit before tax up 2.4% to PS294.1 million from PS287.1 million and up almost 9% in constant currencies. * Diluted headline earnings per share up 9.6% to 18.2p from 16.6p and up almost 19% in constant currencies. * 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 2.8% to 14.7p and up almost 12% in constant currencies. * Interim ordinary dividend up 20% to 4.32p per share. * Average net debt for the first half up PS26 million to PS1,196 million from PS1,170 million, despite cash payments of PS417 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 of PS1.565 billion ($3.051 billion). * Acquisition of new technology company 24/7 Real Media Inc. completed on 2 July 2007. In this press release not all the figures and ratios used are readily available from the unaudited interim results included in Appendix 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 2007. These represent record levels of performance throughout the business and the achievement, as last year, of the Group's financial model, with like-for-like revenues growing over 5% and profits almost 10%, at the same time as earnings per share, on a constant currency basis, grew considerably faster in high double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. through a mixture of acquisitions, share buy-backs and a reduced tax charge. Billings were up almost 5% at PS15.085 billion. Reportable revenue was up 2.0% at PS2.921 billion. On a constant currency basis, revenue was up 7.7% compared with last year, with currency fluctuations, chiefly the strength of the PS sterling against the US dollar, in the first six months reducing the Group's revenue growth by almost 6 percentage points. Over the first half of the year, the US dollar declined 10% against sterling. As a number of our competitors report in US dollars and inter-currency comparisons are difficult to make, Appendix 2 shows WPP's interim results in reportable US dollars. This shows, for example, that US dollar reportable revenues were up by 12.3% to $5.764 billion, headline profits up 16.5% to $757.6 million and diluted headline earnings per share up 20.4% to 36.0C/. Further analysis is included in Appendix 2. On a like-for-like basis, which excludes the impact of acquisitions and currency, revenues were up 5.3% (gross margin up 5.7%) in the first half, the pace accelerating with 6.2% growth in the second 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 (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 5.5% to PS452.5 million and up over 11% in constant currencies. Headline operating profit was up 6.1% to PS383.1 million from PS361.0 million and up 12.1% in constant currencies. Headline operating margins rose yet again, in line with objectives, by 0.5 margin points to 13.1% from 12.6%, also in line with the full year margin target of 15.0%. Before short-term and long-term incentives (including the cost of share-based compensation), operating margins were flat with last year at 16.3%. Short and long-term incentives and the cost of share-based incentives amounted to PS92.2 million or 20.2% of operating profits before bonus and taxes, down slightly on last year as a result of currency movements and the first half impact of additional space and staff costs. On a reported basis the Group's staff cost to revenue ratio, including incentives, improved 0.5 margin points to 59.9% in the first half of 2007, compared with the same period last year, as productivity rose. On a like-for-like basis, the average number of people in the Group, excluding associates, was 81,521 in the first half of the year, compared to 77,948 in 2006, an increase of 4.6%. On the same basis, the total number of people in the Group, excluding associates, at 30 June 2007 was 82,998 compared to 79,599 in June 2006, an increase of 4.3%. Headline profit before tax was up 6.9% to PS338.0 million from PS316.1 million or up 13.7% 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 PS45.1 million compared with PS44.9 million in 2006, reflecting higher interest rates, offset by improved cash management and higher investment income. Reported profit before tax rose by 2.4% to PS294.1 million from PS287.1 million. In constant currencies, pre-tax profits rose by 8.9%. The tax rate on headline profit before tax was 26.9%, down 2.1 percentage points on the first half 2006 rate of 29.0%. Profits attributable to share owners rose by 2.9% to PS181.9 million from PS176.7 million, or up 11.7% in constant currencies. Diluted headline earnings per share rose by 9.6% to 18.2p from 16.6p. In constant currencies, earnings per share on the same basis rose by 18.8%. Diluted reported earnings per share were up 2.8% to 14.7p and up 11.7% in constant currencies. The Board declares an increase of 20% in the interim ordinary dividend to 4.32p per share. The record date for this interim dividend is 12 October 2007, payable on 12 November 2007. Further details of WPP's financial performance are provided in Appendices ap·pen·di·ces n. A plural of appendix. I and 2. 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 2007: [TABLE OMITTED] 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 3 Gross margin up 4.9% 4 Gross margin up 4.1% 5 Gross margin up 5.7% On a constant currency basis, the Group grew at almost 8% and all regions showed good growth. Again, the world grew at three speeds. The faster growing markets of 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 and 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. were at one end of the spectrum and the United Kingdom and 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. at the other, with North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Spain in between. Growth in all regions improved over those seen in the first quarter. 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, with the rate in the first half up over 8%, on a constant currency basis, compared with 6.5% growth in the first quarter. As in the first quarter Asia Pacific, Latin America, Africa and the Middle East, continues to be the fastest growing region A growing region is an area suited by climate and soil conditions to the cultivation of a certain type of crop. Most crops are cultivated not in one place only, but in several distinct regions in diverse parts of the world. , with revenues up almost 12%. Asia Pacific remains strong, with revenues up almost 11%. Mainland China and India continued the rapid growth seen in 2006 and the first quarter of 2007, with first half like-for-like revenues up almost 29% and 22% respectively. Continental Europe was up 6.0%, an improvement over the 4.4% growth in the first quarter, with Central and Eastern Europe particularly strong at almost 19%. The United Kingdom remains the slowest growing region with revenues up 3.7%, with gross margin up 4.9% reflecting the relative scale of our market research revenues in the United Kingdom. As more market research is executed on the web, both revenue and direct costs are reduced. As a result, gross margin is probably the better measure of performance. Estimated net new business billings of PS1.565 billion ($3.051 billion) were won in the first half of the year and the Group continues to benefit from consolidation trends in the industry, winning several assignments from existing and new clients. The faster growing geographical markets of Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, accounted for 23% of the Group's revenues in the first half of 2007. Revenue by Communications Services Sector and Brand The pattern of revenue growth also 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 2007: [TABLE OMITTED] 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 3 Gross margin up 5.9% 4 Gross margin up 4.2% 5 Gross margin up 5.7% Media investment management continues to show the strongest growth of all our communications services sectors, along with direct, internet and interactive. Direct and digitally-related activities now account for approximately 23% of the Group's total revenues, which are running at the rate of approximately $12 billion per annum Per annum Yearly. . Brand advertising, particularly in the new faster growing markets, along with information, insight & consultancy, branding & identity 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 2006, with constant currency revenues up almost 15%, reflecting the positive impact on the sector's growth of social networking See social networking site. social networking - social network on the web, which demonstrates the increased effectiveness of editorial publicity over paid for publicity. Over 53% of the Group's revenues came from outside advertising and media investment management, in the first half of 2007. Advertising and Media Investment Management On a constant currency basis, advertising and media investment management revenues grew by 6.0%, with like-for-like revenue growth of 5.2%. Operating margins improved by 0.6 margin points in the first half. These businesses generated estimated net new business billings of PS1.276 billion ($2.489 billion). Information, Insight and Consultancy The Group's information, insight and consultancy businesses growth improved in the second quarter, with first half revenues, on a constant currency basis, up 3.3% and gross margin up 5.9%. Operating margins improved 0.2 margin points in the first half. Public Relations and Public Affairs In constant currencies, the Group's public relations and public affairs revenues rose by 14.8%, with like-for-like growth of 7.7%. Operating margins improved 0.8 margin points in the first half. Branding and Identity, Healthcare and Specialist Communications The Group's branding and identity, healthcare and specialist communications constant currency revenues were up 10.5%, with operating margins up 0.2 margin points. Particularly good performances were registered by several companies in this sector in the first half - including, in promotion and direct marketing Ogilvy Activation, Wunderman, 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. , G2, Bridge Worldwide, Mando, 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; in branding and identity Enterprise IG, Addison and The Partners; in healthcare Ogilvy Healthworld; and in specialist communications Geppetto, Spafax, the Farm, MJM MJM Multi-Jet Modeling (prototyping manufacturing) MJM Metropolitan Japanese Ministry MJM Married Jewish Male , the Food Group, BDG BDG Building (usually seen as BLDG) BDG Budget BDG Binding BDG Bundaberg (Queensland, Australia) BDG Blanding, Utah (airport code) BDG Batten's Disease Gene , Global Sportnet and Headcount. Cash Flow and Balance Sheet A summary of the Group's unaudited cash flow statement and balance sheet and notes as at 30 June 2007 are provided in Appendix I. In the first half of 2007, operating profit was PS320 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. PS117 million, non-cash based incentive charges PS33 million, net interest paid PS67 million, tax paid PS76 million, capital expenditure PS72 million and other net cash inflows PS24 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, acquisitions and share re-purchases was, therefore, PS279 million. This free cash flow was absorbed by PS208 million in net cash acquisition payments and investments (of which PS141 million was for initial acquisition payments net of disposal proceeds, PS65 million was for earnout payments and the balance of PS2 million related to prior year loan note redemptions), and PS209 million by share re-purchases, a total outflow of PS417 million. This resulted in a net cash outflow of PS138 million, before any changes in working capital. Average net debt in the first six months of 2007 rose by PS85 million to PS1,196 million, compared to PS1,111 million in 2006, at 2007 exchange rates. On 30 June 2007 net debt was PS1,264 million, against PS1,219 million on 30 June 2006, an increase of PS45 million. Your Board continues to examine ways of deploying its EBITDA of over PS1 billion (over $2 billion) and substantial cash flow of over PS700 million or over $1.4 billion per annum, to enhance share owner value, given that interest cover remains strong at 8.5 times in the first half of 2007, in comparison to 8.0 times on a comparable basis, in the first half of 2006. 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 share buy-backs. In the first half of 2007, the Group continued to make small to medium-sized acquisitions or investments in high growth geographical 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 (including digital), the United Kingdom, Austria, France, Germany (including digital), the Netherlands (including digital), Russia, Spain, South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. , Brazil, Colombia, Australia, China and Japan; in information, insight & consultancy in the United States and the United Kingdom; in public relations & public affairs in the United States; in healthcare in the United Kingdom The vast majority of health care in the United Kingdom (UK) is provided by the four National Health Services (commonly referred to in the singular as "the" NHS) which are funded by the taxpayer and are not insurance based systems. ; in branding and identity in Ireland and in direct, internet & interactive in the United States, Belgium, Germany, South Africa, the Middle East, Chile, Mexico, Korea and Singapore. The acquisition of 24/7 Real Media Inc., was completed after the half-year end on 2 July 2007. This represents the company's first (and the communications services industry's first) major investment in the application of modern media technology to advertising and marketing services. In addition to increasing the interim dividend by 20% to 4.32p 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 in 2006. As a result, the Group accelerated its share repurchase programme and now aims to buy-back up to 4-5% of its share capital each year, as compared to 1-3% historically. In the first half of the year, 27.906 million ordinary shares equivalent to 2.3% of the share capital, were purchased at an average price of PS7.50 and total cost of PS209 million. All of these shares were purchased in the market and subsequently cancelled. Client Developments in the First Half of 2007 Including associates, the Group currently employs over 102,000 full-time people in over 2,000 offices in 106 countries. 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 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, Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, reinforced by a continued improvement in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , although the United Kingdom remains relatively weak, even against Western Continental Europe. In the last few months, Spain has shown continued strength and France slower growth, with the rest of Western Europe showing progress in Quarter 2 over Quarter 1. Like-for-like revenue was up over 5% in the first half of 2007. This trend continued into the second half, with July like-for-like revenues up strongly over 7%. Experts forecast that the industry will grow at 4-5% this year, which, so far, the group has exceeded, growing market share. An operating margin of 13.1% was achieved in the first half, in line with the Group's revised margin target for 2007 of 15.0%. The first half of 2007 saw another significant improvement in activity, even against the strong performance of 2006. Levels of activity in 2007 should match, or surpass, those seen in 2006 and there are significant new business opportunities at both the network and parent company levels. As long as the United States economy holds up, 2008 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 see Hillary Clinton nominated and elected. 2008 should be a bumper year, with the culmination of these two major events and the European Football Championships in Austria and Switzerland. 2009 may see slower growth, following the anticipated strength of 2008 and as the new United States administration wrestles with the country's fiscal and trade imbalances. 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 environment, which remains a government and central bank priority and which has been with us continuously for almost 16 years, significant, repeated, 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 house prices. Any 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 by regulatory 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 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 the traditional media and, more importantly, direct, internet and interactive (including mobile and video) are taking a growing share of client spending, albeit from lower absolute and relative levels. Similarly, but geographically, Asia Pacific (particularly but not exclusively China and India and including the new tigers of Indonesia, Pakistan and Vietnam), Latin America, despite some political volatility and some 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 Central and Eastern Europe are becoming more and more significant, again from lower absolute and relative levels. We are finding that our industry is becoming more and more multi-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 Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe. 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 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 Pacific, 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], iPhones[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. It is difficult to imagine what those half a dozen PhDs might now be cooking up in Beijing or Bangalore, let alone Silicon Valley. Since the birth of WPP in 1985, some 22 years ago, our industry has, so far, seen three distinct phases. The first, some 15-20 years ago, as David Ogilvy David MacKenzie Ogilvy, CBE (June 23, 1911–July 21, 1999), was a notable advertising executive. He has often been called “The Father of Advertising.” In 1962, Time called him “the most sought-after wizard in today's advertising industry. would, perhaps, have phrased it, the era of the Big Idea. This is just as critical today, as big creative ideas need to differentiate clients' products and services, either tangibly or intangibly in 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. world. Secondly, around 10 years ago, we saw the beginning of the growth and concentration of media planning and buying or what we call media investment management. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. industry research sources, approximately 1-in-4 advertisements you may see anywhere in the world may have been planned or bought by WPP's GroupM and its constituent operating brands MindShare, Mediaedge:cia, MediaCom or Maxus. GroupM increasingly provides one buying point in each country to give clients increased cross-platform content opportunities, buying leverage and consumer and research insights. Inside WPP, there is, therefore, an almost $40 billion (the level of our gross media billings and turnover) media engine that mirrors the importance of media in the Japanese or Dentsu model. As a result, traditional media faces increased buying concentration, as well as the challenges of new media and technology. Finally, we are witnessing, the third era - the application of technology, where high science is being increasingly applied to advertising and marketing services industries. This kicked off with a major land-grab by Google, with its proposed $3.1 billion purchase of DoubleClick, our own $650 million purchase of 24/7 Real Media Inc. and Microsoft's $6.1 billion purchase of aQuantive. It does not include, as some have suggested, the purchase of digital agencies. DoubleClick, 24/7 Real Media Inc. and aQuantive represent, for the first time, the application of modern technology to provide advertising and marketing solutions for clients. Whilst also about talent, these initiatives really concern the deployment of detailed and precise technology in our industry for the first time. This land-grab has also set off a related wave of agency consolidations. The prospects for trading performance improvements at WPP remain good too. Six months ago the Group increased its margin target for 2009 to 16.0% and for 2010 to 16.5%. The Group is on track to achieve this accelerated timetable. Our long term operating margin target remains 19%. 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, 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 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. . Increasing co-operation, although more difficult to achieve in a multi-branded company, which has grown by acquisition, than in an organically grown uni-branded one, remains a priority. The Group also continues to concentrate on its long-term targets and strategic objectives of improving operating profits by 10-15%; 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 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 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 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. [TABLE OMITTED] 1 The basis for calculating the constant currency percentage change shown above 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. 2 The calculations of the Group's earnings per share and Headline earnings per share are set out in note 9. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] 1 Included within Bank overdrafts and loans is the Grey $150m convertible debenture Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . This was classified as a non-current liability in June 2006, but the directors now consider this liability to be current as the holders of the bond can convert at any time. The June 2006 comparative figures have been reclassified accordingly. 2 Investments in own shares held by the ESOP ESOP See: Employee Stock Ownership Plan ESOP See Employee Stock Ownership Plan (ESOP). Trusts. [TABLE OMITTED] [TABLE OMITTED] The goodwill impairment charge of PS29.0 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 an 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. The Directors will reassess reassess Verb to reconsider the value or importance of reassessment n Verb 1. reassess - revise or renew one's assessment reevaluate the need for any further impairment write-downs at year end. Share of results of associates include: [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] 1 Headline PBIT is defined in note 17. [TABLE OMITTED] 1 Headline PBIT is defined in note 17. [TABLE OMITTED] 1 Headline PBT PBT Provider Backbone Transport (networking technology adding determinism to ethernet) PBT Polybutylene Terephthalate PBT Profit Before Tax PBT Paper Based Test (education) is defined in note 17. 8. Ordinary dividends The Board has recommended an interim dividend of 4.32p (2006: 3.60p) per ordinary share. This is expected to be paid on 12 November 2007 to share owners on the register at 12 October 2007. The Board recommended a final dividend of 7.61p per ordinary share in respect of 2006. This was approved by the company's shareholders at the Annual General Meeting on 26 June 2007 and paid on 9 July 2007. 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] 1 Reported earnings is equivalent to profit for the period attributable to equity holders of the parent. [TABLE OMITTED] Diluted EPS has been calculated based on the Reported and Headline Earnings amounts above. For the six months ended 30 June 2007 and the six months ended 30 June 2006 the $150 million Grey convertible was dilutive and earnings were consequently increased by PS0.5 million. For the six months ended 30 June 2006, the PS450 million convertible bonds were accretive to earnings and therefore excluded from the calculation of dilutive earnings; these bonds were redeemed on their due date of 11 April 2007. A reconciliation between the shares used in calculating Basic and Diluted EPS is as follows: [TABLE OMITTED] At 30 June 2007 there were 1,217,999,223 ordinary shares in issue. [TABLE OMITTED] Acquisitions and disposals: [TABLE OMITTED] [TABLE OMITTED] Net increase/(decrease) in borrowings: [TABLE OMITTED] Cash and cash equivalents: [TABLE OMITTED] 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 [TABLE OMITTED] 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 Notes to the unaudited consolidated interim financial statements (Notes 1 - 17) (continued) 12. Goodwill and acquisitions Goodwill in relation to subsidiary undertakings increased by PS96.3 million (30 June 2006: decrease of PS182.5 million) in the period. This movement includes both additional goodwill arising on acquisitions completed in the period and adjustments to goodwill relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc acquisitions completed in prior years, net of impairment charges and the effect of currency translation. Goodwill in relation to associate undertakings increased by PS29.3 million (30 June 2006: decrease of PS54.0 million) in the period. Future anticipated payments to vendors in respect of both deferred and earnout obligations totalled PS284.5 million (period ended 30 June 2006: PS167.7 million; year ended 31 December 2006: PS235.5 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 the six months ended 30 June 2007 was not material. The Group completed the acquisition of 24/7 Real Media, Inc. on 2 July 2007 for total consideration of approximately $650 million. The company will be consolidated in the results of the Group from that date. 13. Other 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. The following are included in other intangibles: [TABLE OMITTED] 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: [TABLE OMITTED] [TABLE OMITTED] The following table sets out payments due to vendors, comprising deferred consideration and the directors' best estimates of future earnout related obligations: [TABLE OMITTED] 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 30 June 2007. Note 12 includes details of a material acquisition which has been completed since 30 June 2007, 24/7 Real Media, Inc. [TABLE OMITTED] 1 During the period, the Company entered into an arrangement with its broker to conduct share buybacks on the Company's behalf in the close period commencing on 2 July 2007 and ending on 16 August 2007, in accordance with UK listing rules. Under IAS See iPlanet Application Server. 1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle. 32 and IAS 39, the commitment resulting from this agreement constitutes a financial liability at 30 June 2007 which must be recognised at fair value at that date. This liability is included in Trade and other payables: amounts falling due within one year and has been recognised as a movement in equity. Issued share capital - movement in the period [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] 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 2007 which comprise the 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. , the consolidated statement of recognised income and expense, the consolidated cash flow statement, the 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. 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 The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. 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 Analytical Procedures is one of financial audit skill which help an auditor understand the client's business and changes in the business, to identify potential risk areas and to plan other audit procedures. to the financial information and underlying financial data and, based thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that , 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 International Standards on Auditing (ISA) are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants. (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 2007. Deloitte & Touche LLP London Chartered Accountants 16 August 2007 [TABLE OMITTED] 1 The unaudited consolidated income statement above is presented in reportable US Dollars for information purposes only and has been prepared assuming the US Dollar is the reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. of the Group, whereby local currency results are translated into US Dollars at actual monthly average exchange rates in the periods presented. Among other currencies, this includes an average exchange rate of US$1.9703 to the pound for the period ended 30 June 2007 (period ended 30 June 2006: US$1.7908; year ended 31 December 2006: US$1.8432). 2 The basis of the calculations of the Group's earnings per share and Headline earnings per share are set out in note 9 of Appendix 1. [TABLE OMITTED] |
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