Filed by WPP Group Plc
Pursuant to Rule 425 under the Securities Act
Subject Company, Young & Rubicam Inc.
Commission File No. 001-14093
FOR IMMEDIATE RELEASE 14 AUGUST 2000
WPP
---
2000 INTERIM RESULTS
--------------------
REVENUE UP ALMOST 19% TO $1.898 BILLION ((POUND)1.209 BILLION)
--------------------------------------------------------------
PROFIT BEFORE TAX UP OVER 22% TO $216.2 MILLION ((POUND)137.7 MILLION)
----------------------------------------------------------------------
AGAINST $176.8 MILLION ((POUND)112.6 MILLION)
---------------------------------------------
DILUTED EARNINGS PER SHARE UP OVER 22% TO 18.8c (12.0p) FROM 15.4c (9.8p)
-------------------------------------------------------------------------
INTERIM ORDINARY DIVIDEND UP 20% TO 1.9c (1.2p) PER SHARE
---------------------------------------------------------
o Revenue up almost 19% to $1.898 billion ((pound)1.209 billion) and up
almost 18% in constant currencies
o Profit before interest and tax up almost 25% to $252.3 million
((pound)160.7 million) and up over 25% in constant currencies
o Operating margin up 0.6 margin points and 0.7 margin points in
constant currencies in line with objectives
o Profit before tax up over 22% to $216.2 million ((pound)137.7 million)
and up over 23% in constant currencies
o Diluted earnings per share up over 22% to 18.8c (12.0p) from 15.4c
(9.8p) and up over 23% in constant currencies
o Interim ordinary dividend up 20% to 1.9c (1.2p) per share
o Net new business billings of over $1.7 billion ((pound)1.1 billion) up
13% over $1.5 billion ((pound)1.0 billion) in comparable period
o Before exceptional operating costs pro-forma revenues of WPP including
Young & Rubicam Inc up over 19%, operating profit up almost 28% and
operating margin up 0.8 margin points in constant currencies
Summary of Results
------------------
The Board of WPP Group plc (NASDAQ: WPPGY) announces its results for the
six months ended 30 June 2000, which show significant continued
improvement.
Turnover was up 27% to $8.9 billion ((pound)5.7 billion) in the first six
months of 2000.
Reportable revenue was up almost 19% at $1.898 billion ((pound)1.209
billion). On a constant currency basis revenue was up almost 18%. Excluding
acquisitions constant currency revenue was up over 15%.
Profit before interest and tax was up almost 25% to $252.3 million
((pound)160.7 million) from $202.4 million ((pound)128.9 million) and up
over 25% in constant currencies.
Reported operating margins rose by 0.6 margin points to 13.3% from 12.7% in
line with the Group's financial objectives. In constant currencies the
operating margin grew by 0.7 margin points. Reported operating costs rose
by over 18% and rose by over 17% in constant currencies.
The Group's staff cost to gross margin ratio excluding variable
compensation fell to 55.9% from 56.4%. On a like-for-like basis the average
number of people in the Group was 30,601 in the first half of the year,
compared to 28,719 in 1999, an increase of 6.6%. The total number of people
in the Group at the half year end was 31,416 against 27,334 in 1999.
Net interest payable and similar charges increased to $36.1 million
((pound)23.0 million) from $25.6 million ((pound)16.3 million), reflecting
improved profitability more than offset by the impact of increased interest
rates, share repurchases and acquisitions.
Reported profit before tax rose by over 22% to $216.2 million ((pound)137.7
million) from $176.8 million ((pound)112.6 million). In constant currency
pre-tax profits rose by over 23%.
The tax rate on profit on ordinary activities fell to 30% from 31% last
year.
Diluted earnings per share were up over 22% at 18.8c (12.0p), and were up
over 23% in constant currencies.
The Board recommends an increase of 20% in the interim ordinary dividend to
1.9c (1.2p) per share. The record date for this interim dividend is 15
September 2000, payable on 20 November 2000.
Further details of WPP's financial performance are provided in Appendix I
(in sterling) and Appendix II (in euros).
<PAGE>
Merger with Young & Rubicam Inc ("Y&R")
---------------------------------------
On 11 May, 2000 it was announced that the Boards of WPP and Y&R had reached
agreement to merge by means of an all-share offer by WPP for Y&R. The terms
were 0.835 WPP American Depositary shares or 4.175 WPP ordinary shares for
every Y&R share.
WPP's offer valued Y&R at $4.7 billion ((pound)3.1 billion) on the day of
the announcement. The Hart-Scott-Rodino waiting period has expired without
request for further information and listing particulars, notice of the
necessary WPP Extraordinary General Meeting and proxy documents will be
dispatched to WPP and Y&R share owners in due course. It is anticipated
that both sets of share owners will vote on the transaction towards the end
of September with closing shortly thereafter.
Before UK GAAP exceptional operating costs in connection with the issue of
treasury stock by Y&R, pro-forma revenues for the combined Group in the
first half of 2000 rose by over 19% on a constant currency basis, operating
profit up almost 28% and pre-tax profits up 25%. Operating margins rose by
0.8 margin points to 13.2% and staff costs to gross margin excluding
variable compensation fell by 0.5 margin points to 56.6% from 57.1%. The
total number of people in the combined Group, excluding associates,
totalled 47,932 at June 30, 2000. Further pro-forma information is provided
in Appendix III.
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 (on a constant
currency basis) by region for the first six months of 2000.
REGION REVENUE AS A % REVENUE GROWTH%
OF TOTAL GROUP 00/99
North America 45.8 18.5
United Kingdom 19.4 10.8
Continental Europe 18.1 19.8
Asia Pacific, Latin America, Africa 16.7 23.7
& Middle East
---- ----
TOTAL GROUP 100 17.9
---- ----
As can be seen, North America, UK and Continental Europe continued to grow
strongly. Strong recovery continued in Asia Pacific and Latin America.
Net new business billings of almost $1.7 billion ((pound)1.1 billion) were
won in the first half of the year, 13% up on $1.5 billion ((pound)1.0
billion) in the comparable period last year.
Including Y&R, on the same basis and for the same period, the proportion of
revenue and revenue growth by region was as follows:
REGION REVENUE AS A % REVENUE GROWTH%
OF TOTAL GROUP 00/99
North America 48.9 17.6
United Kingdom 16.0 12.8
Continental Europe 19.5 18.7
Asia Pacific, Latin America, 15.6 34.6
Africa & Middle East
---- ----
TOTAL ENLARGED GROUP 100 19.2
---- ----
<PAGE>
Revenue by Communications Services Sector and Brand
---------------------------------------------------
The pattern of revenue growth varied by communications services sector and
company brand. The table below gives details of the proportion of revenue
and revenue growth by communications services sector (on a constant
currency basis) for the first six months of 2000.
COMMUNICATIONS SERVICES REVENUE AS A REVENUE GROWTH%
% OF TOTAL GROUP 00/99
Advertising and Media Investment 46.0 15.8
Management
Information and Consultancy 19.8 24.4
Public Relations and Public 10.1 44.3
AFFAIRS*
Branding and Identity, Healthcare 24.1 8.6**
and Specialist Communications
---- ----
TOTAL GROUP 100 17.9
---- ----
* The revenue figures submitted to the O'Dwyer Report reflect some
public relations income which is included here in advertising and
media investment management and branding and identity, healthcare and
specialist communications. Total public relations and public affairs
revenues grew almost 40% to $227 million.
** Gross profit up over 22% on a like-for-like basis.
Including Y&R, on the same basis and for the same period, the proportion of
revenue and revenue growth by communications services sector was as
follows:
COMMUNICATIONS SERVICES REVENUE AS A REVENUE GROWTH%
% OF TOTAL GROUP 00/99
Advertising and Media Investment 45.9 16.8
Management
Information and Consultancy 13.2 24.4
Public Relations and Public Affairs 13.7 37.0
Branding and Identity, Healthcare 27.2 13.6**
and Specialist Communications
---- ----
TOTAL ENLARGED GROUP 100 19.2
---- ----
** Gross profit up over 22% on a like-for-like basis.
Advertising and Media Investment Management
-------------------------------------------
On a constant currency basis, combined revenue at Ogilvy (including Cole &
Weber and OgilvyOne), J Walter Thompson Company, Conquest and MindShare
rose by almost 22%, whilst operating margins continued to improve.
Ogilvy, J Walter Thompson Company, Conquest and MindShare generated net new
business billings of $1.4 billion ((pound)900 million), 27% up on that
achieved in the first six months of 1999.
Information and Consultancy
---------------------------
The Group's information and consultancy businesses continued their growth,
with revenues increasing by over 24%, operating profit up over 27% and as a
result improving operating margins.
Public Relations and Public Affairs
-----------------------------------
The Group's public relations and public affairs revenues showed significant
continued growth, rising over 44%, with operating margins at almost 16%
well beyond previous objectives. Hill and Knowlton's revenues rose 29% and
the company continued to improve its operating margins significantly.
Ogilvy Public Relations Worldwide's revenues rose by almost 85%, also with
significant improvement in its operating margin.
Branding and Identity, Healthcare and Specialist Communications
---------------------------------------------------------------
The Group's branding and identity, healthcare and specialist communications
revenues grew by almost 9% over last year with gross margin, a more
accurate indicator of top-line growth, up over 22% on a like-for-like basis
and operating margins improving. Particularly good performance was
registered by several companies in this sector in the first half, including
in promotion and direct marketing by RTCdirect, Einson Freeman,
Perspectives, OgilvyOne and A Eicoff & Company; in branding and identity by
Enterprise IG, Scott Stern, Coley Porter Bell and Banner McBride; in
healthcare by Shire Hall Group; and in other specialist marketing services
by The Henley Centre, JWT Specialized Communications, P.Four Consultancy
and Management Ventures.
Cashflow and Balance Sheet
--------------------------
A summary of the Group's cashflow statement and balance sheet and notes as
at 30 June 2000 are provided in Appendices I and II.
Improved profitability has continued to have a positive effect on the
Group's balance sheet. In the first half of 2000, operating profit was $231
million ((pound)147 million), depreciation $39 million ((pound)25 million),
interest paid $34 million ((pound)22 million), tax paid $50 million
((pound)32 million) and other cash inflows $20 million ((pound)13 million).
This resulted in net cash generation of $206 million ((pound)131 million)
for the first six months of 2000, compared to $160 million ((pound)102
million) in the comparable period last year. The Group invested $47 million
((pound)30 million) in capital expenditure, $182 million ((pound)116
million) in cash acquisition payments and investments and $72 million
((pound)46 million) in share repurchases and dividends, a total outflow of
$301 million ((pound)192 million).
For the twelve months ended 30 June 2000 the net cash generation was $416
million ((pound)265 million) which was invested in capital expenditure of
$113 million ((pound)72 million), cash acquisition payments and investments
of $427 million ((pound)272 million) and share repurchases and dividends of
$129 million ((pound)82 million) a total expenditure of $669 million
((pound)426 million). Net debt averaged $510 million ((pound)325 million)
for the first half of 2000 versus $297 million ((pound)189 million) for the
same period last year. On 30 June 2000 net bank borrowings were $443
million ((pound)292 million) against $79 million ((pound)52 million) on 30
June 1999.
The Board continues to examine ways of deploying its substantial cashflow
of almost $377 million ((pound)240 million) per annum to enhance share
owner value particularly given that interest cover is almost seven times.
Cashflow and interest cover will be further improved by the proposed
all-equity acquisition of Y&R. As necessary capital expenditure normally
approximates to 1-1.2x the depreciation charge, the Company has
concentrated on examining possible acquisitions or returning excess capital
to share owners in the form of dividends or share buy-backs.
In the first half of 2000, acquisitions have been completed in advertising
and media investment management in China, Israel, Italy, the Middle East,
Netherlands, Puerto Rico and Spain; in information and consultancy in
Denmark and Sweden; in public relations and public affairs in Poland and
the United States; and in branding and identity, healthcare and specialist
communications - in branding and identity in Australia, Singapore and the
United States; in direct in Australia, Canada, Poland, Spain and the United
Kingdom; and in interactive in Canada, Mexico and the United Sates.
In addition to increasing the interim dividend by 20% to $15 million
((pound)9.3 million) or 1.9c (1.2p) per share, the Company has continued
its rolling share buy-back programme in the first half of the year by
repurchasing 4.8 million shares at an average price of $15.02 ((pound)9.57)
per share and total cost of $72 million ((pound)46 million). The Company's
objective remains to buy-back approximately $157 million - $236 million
((pound)100 million - (pound)150 million) of shares each year, equivalent
to 1-2% of the ordinary share capital.
wpp.com
-------
The new economy continues to have a significant impact on wpp.com. Despite
the recent correction of stock market valuations of internet businesses on
both sides of the Atlantic, web revenues continue to grow strongly. In
particular, traditional brands have increased their efforts and their
expenditure as they come to terms with the challenges and opportunities
offered by the new technologies. Work with traditional clients and with
some of their spin-offs continues to provide much of the growth in our
interactive business. Demand from traditional clients has allowed us to be
selective in choosing the start-ups we work with and to pick those that we
feel are well funded with a compelling offer.
Narrowly defined web revenues for the half year - confined to web based
work and excluding off-line expenditure for on-line brands - grew to over
$90 million. This is well above budget and compares favourably with over
$30 million for the same period in 1999. These figures exclude the
operations of companies such as Syzygy, Concept! and Roundarch in which we
own minority interests. Particularly strong performances were recorded by
OgilvyInteractive, digital@jwt, Research International and Millward Brown
Interactive. Operating margins for these businesses are similar to, or
better than, those of WPP as a whole.
Off-line work for internet start-ups and "clicks and mortar" operations
continued to develop strongly in all regions. Particularly strong growth
was recorded at Ogilvy, AlexanderOgilvy, J Walter Thompson Company, Blanc &
Otus and Enterprise IG. A notable feature has been the growth of
business-to-business clients who now account for over half of our work in
this area. While there has been considerable "churn" amongst start-ups,
demand continues to exceed supply and we have been able to maintain or
increase fee levels. As we suspected, it is growing increasingly difficult
to isolate web-related revenues given that much of the work for clients
involves the total integration of their web and traditional activities. We
estimate that these more broadly defined web revenues - including off-line
spending by on-line brands - have grown by 30% in the first half of the
year to over 15% of total revenues.
We have continued to invest in a range of start-ups in order to better
understand developments and the capabilities we need to develop and widen
the offer we can make to clients. Investments in the first half have been
made in Inferentia (Italy's leading e-commerce and web consulting company),
Metapack (in e-fulfilment and logistics), Advertising.com (a leader in
targeting on-line media), Imagine (e-crm), Intraspect (knowledge management
software), Red Sheriff (web traffic measurement and the dominant provider
in Australia), Spydre (a Latin American incubator) and BigWords (the US
leader in targeting 18-24 year olds for content and e-commerce).
In addition, a number of acquisitions have been made of companies with
strong technology and web capabilities to strengthen our core operating
brands.
Client Developments in the First Half of 2000
---------------------------------------------
At the end of the half year, the Group worked with over 60 major national
or multi-national clients in three or more functions. This reflects the
increasing opportunities for co-ordination between activities both
nationally and internationally. The Group also works with well over 100
clients in 6 or more countries. The Group now serves more than 300 of the
Fortune 500 and approximately half of the NASDAQ 100. Including associates
the Group currently employs over 39,000 people in 950 offices in 92
countries.
The Group estimates that more than 20% 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 has continued to improve in the first half of 2000.
The Company is firing on all cylinders, gaining market share in all
geographic regions including the United States, United Kingdom, Continental
Europe, Asia Pacific and Latin America.
Functionally, advertising and media investment management have accelerated
their top-line growth rates, whilst continuing to improve their operating
profits and margins. Information and consultancy, public relations and
public affairs, branding and identity, healthcare and specialist
communications have continued to improve operating profits and operating
margins at higher levels of revenue and gross margin growth.
Underlying revenue trends are sound with the Group growing faster than the
market and therefore increasing market share. Prospects for the latter half
of 2000 look equally good (early indications are that July revenues are up
over 20% on a constant currency basis) and industry projections for
advertising market growth in 2001 look only slightly lower than 2000 in the
range of 5-6%. Marketing services expenditures will continue to grow at a
faster rate. Continual concerns about stock market valuations and economic
over-heating on both sides of the Atlantic are balanced by the focus of
governments on fiscal restraint and the independence of central banks in
controlling interest rate policies.
Although market conditions are good, plans, budgets and forecasts of
revenues 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. Continued progress is being made in these
areas. For example, on a comparable basis, the combined operating margins
of Ogilvy, J Walter Thompson Company and MindShare rose to 15.6% from 14.6%
in the first half of 2000 compared to the same period in 1999.
In addition to influencing absolute levels of cost, the initiatives taken
by the parent company in the areas of human resources, property,
procurement, information technology and practice development continue to
improve the flexibility of the Group's cost base.
This will become increasingly important if and when economic activity
stalls. Over the last five years fixed staff and property costs have fallen
from 56.7% to 51.8% of revenue.
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, new
technologies, new markets, retailing, internal communications, hi-tech,
financial services and media and entertainment.
The Group continues to concentrate on its objectives of improving operating
profits by 15-20% per annum; improving operating margins by 1 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 20-33 1/3% of incremental revenue
to profit and growing revenue faster than industry averages and encouraging
co-operation between Group companies.
In addition to introducing greater flexibility into its cost structure, the
Group is competitively well positioned to weather any economic uncertainty
because of its stronger financial position, its geographic spread, its
consistent new business record and its competitive strength in information
and consultancy, public relations and public affairs, identity and
branding, healthcare and specialist communications - particularly as
clients decide to spend an increasing proportion of their marketing budgets
on "below-the-line" activities.
The Group is in line to achieve its fourth margin plan target of 14.0% in
2000. Following the announcement of the merger with Y&R, a fifth margin
plan was announced to increase operating margins to 15.0% in 2001 and 15.5%
in 2002. This would bring the Group's performance into line with the best
performing competition. Consideration is already being given to a more
ambitious longer-term margin plan beyond 2002.
For further information:
Sir Martin Sorrell}
Paul Richardson } 44-20-7408-2204
Feona McEwan } 1-212-632-2301
www.wpp.com
-----------
This announcement has been filed at the Company Announcements Office of the
London Stock Exchange and is being distributed to all owners of Ordinary
shares and American Depository Receipts. 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 of 1995
introduced in the United States of America. This announcement may contain
forward-looking statements 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.
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.
WPP and Y&R have filed a proxy statement/prospectus and other relevant
documents concerning the merger with the U.S. SEC. INVESTORS ARE URGED TO
READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain the documents free of charge
at the SEC's web-site (www.sec.gov). In addition, documents filed with the
SEC by WPP may be obtained free of charge by contacting WPP c/o WPP Group
USA, Inc., Worldwide Plaza, 309 West 49th Street, New York, NY 10019-7399,
(212) 632-2200. Documents filed with the SEC by Y&R will be available free
of charge by contacting Y&R Inc., Legal Department, 285 Madison Avenue, New
York, NY 10017, (212) 210-3000.
<PAGE>
FOR IMMEDIATE RELEASE 14 AUGUST 2000
WPP
---
2000 INTERIM RESULTS
--------------------
REVENUE UP ALMOST 19% TO (POUND)1.209 BILLION
---------------------------------------------
PROFIT BEFORE TAX UP OVER 22% TO (POUND)137.7 MILLION AGAINST
-------------------------------------------------------------
(POUND)112.6 MILLION
--------------------
DILUTED EARNINGS PER SHARE UP OVER 22% TO 12.0p FROM 9.8p
---------------------------------------------------------
INTERIM ORDINARY DIVIDEND UP 20% TO 1.2p PER SHARE
--------------------------------------------------
o Revenue up almost 19% to(POUND)1.209 billion and up almost 18% in
constant currencies
o Profit before interest and tax up almost 25% to(POUND)160.7 million
and up over 25% in constant currencies
o Operating margin up 0.6 margin points and 0.7 margin points in
constant currencies in line with objectives
o Profit before tax up over 22% to(POUND)137.7 million and up over 23%
in constant currencies
o Diluted earnings per share up over 22% to 12.0p from 9.8p and up over
23% in constant currencies
o Interim ordinary dividend up 20% to 1.2p per share
o Net new business billings of over(POUND)1.1 billion ($1.7 billion) up
13% over(POUND)1.0 billion ($1.5 billion) in comparable period
o Before exceptional operating costs pro-forma revenues of WPP including
Young & Rubicam Inc up over 19%, operating profit up almost 28% and
operating margin up 0.8 margin points in constant currencies
<PAGE>
Summary of Results
------------------
The Board of WPP Group plc announces its results for the six months ended
30 June 2000, which show significant continued improvement.
Turnover was up 27% to (POUND)5.7 billion in the first six months of 2000.
Reportable revenue was up almost 19% at (POUND)1.209 billion. On a constant
currency basis revenue was up almost 18%. Excluding acquisitions constant
currency revenue was up over 15%.
Profit before interest and tax was up almost 25% to (POUND)160.7 million
from (POUND)128.9 million and up over 25% in constant currencies.
Reported operating margins rose by 0.6 margin points to 13.3% from 12.7% in
line with the Group's financial objectives. In constant currencies the
operating margin grew by 0.7 margin points. Reported operating costs rose
by over 18% and rose by over 17% in constant currencies.
The Group's staff cost to gross margin ratio excluding variable
compensation fell to 55.9% from 56.4%. On a like-for-like basis the average
number of people in the Group was 30,601 in the first half of the year,
compared to 28,719 in 1999, an increase of 6.6%. The total number of people
in the Group at the half year end was 31,416 against 27,334 in 1999.
Net interest payable and similar charges increased to (POUND)23.0 million
from (POUND)16.3 million, reflecting improved profitability more than
offset by the impact of increased interest rates, share repurchases and
acquisitions.
Reported profit before tax rose by over 22% to (POUND)137.7 million from
(POUND)112.6 million. In constant currency pre-tax profits rose by over
23%.
The tax rate on profit on ordinary activities fell to 30% from 31% last
year.
Diluted earnings per share were up over 22% at 12.0p, and were up over 23%
in constant currencies.
The Board recommends an increase of 20% in the interim ordinary dividend to
1.2p per share. The record date for this interim dividend is 15 September
2000, payable on 20 November 2000.
Further details of WPP's financial performance are provided in Appendix I
(in sterling) and Appendix II (in euros).
<PAGE>
Merger with Young & Rubicam Inc ("Y&R")
---------------------------------------
On 11 May, 2000 it was announced that the Boards of WPP and Y&R had reached
agreement to merge by means of an all-share offer by WPP for Y&R. The terms
were 0.835 WPP American Depositary shares or 4.175 WPP ordinary shares for
every Y&R share.
WPP's offer valued Y&R at (POUND)3.1 billion ($4.7 billion) on the day of
the announcement. The Hart-Scott-Rodino waiting period has expired without
request for further information and listing particulars, notice of the
necessary WPP Extraordinary General Meeting and proxy documents will be
dispatched to WPP and Y&R share owners in due course. It is anticipated
that both sets of share owners will vote on the transaction towards the end
of September with closing shortly thereafter.
Before UK GAAP exceptional operating costs in connection with the issue of
treasury stock by Y&R, pro-forma revenues for the combined Group in the
first half of 2000 rose by over 19% on a constant currency basis, operating
profit up almost 28% and pre-tax profits up 25%. Operating margins rose by
0.8 margin points to 13.2% and staff costs to gross margin excluding
variable compensation fell by 0.5 margin points to 56.6% from 57.1%. The
total number of people in the combined Group, excluding associates,
totalled 47,932 at June 30, 2000. Further pro-forma information is provided
in Appendix III.
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 (on a constant
currency basis) by region for the first six months of 2000.
REGION REVENUE AS A % REVENUE GROWTH%
OF TOTAL GROUP 00/99
North America 45.8 18.5
United Kingdom 19.4 10.8
Continental Europe 18.1 19.8
Asia Pacific, Latin America, 16.7 23.7
Africa & Middle East
--- ----
TOTAL GROUP 100 17.9
--- ----
<PAGE>
As can be seen, North America, UK and Continental Europe continued to grow
strongly. Strong recovery continued in Asia Pacific and Latin America.
Net new business billings of almost (POUND)1.1 billion ($1.7 billion) were
won in the first half of the year, 13% up on (POUND)1.0 billion ($1.5
billion) in the comparable period last year.
Including Y&R, on the same basis and for the same period, the proportion of
revenue and revenue growth by region was as follows:
REGION REVENUE AS A % REVENUE GROWTH%
OF TOTAL GROUP 00/99
North America 48.9 17.6
United Kingdom 16.0 12.8
Continental Europe 19.5 18.7
Asia Pacific, Latin America, 15.6 34.6
Africa & Middle East
--- ----
TOTAL ENLARGED GROUP 100 19.2
--- ----
Revenue by Communications Services Sector and Brand
---------------------------------------------------
The pattern of revenue growth varied by communications services sector and
company brand. The table below gives details of the proportion of revenue
and revenue growth by communications services sector (on a constant
currency basis) for the first six months of 2000.
COMMUNICATIONS SERVICES REVENUE AS A REVENUE GROWTH%
% OF TOTAL GROUP 00/99
Advertising and Media Investment 46.0 15.8
Management
Information and Consultancy 19.8 24.4
Public Relations and Public 10.1 44.3
Affairs*
Branding and Identity, Healthcare 24.1 8.6**
and Specialist Communications
---- ----
TOTAL GROUP 100 17.9
--- ----
* The revenue figures submitted to the O'Dwyer Report reflect some
public relations income which is included here in advertising and
media investment management and branding and identity, healthcare and
specialist communications. Total public relations and public affairs
revenues grew almost 40% to $227 million.
** Gross profit up over 22% on a like-for-like basis.
<PAGE>
Including Y&R, on the same basis and for the same period, the proportion of
revenue and revenue growth by communications services sector was as
follows:
COMMUNICATIONS SERVICES REVENUE AS A REVENUE GROWTH%
% OF TOTAL GROUP 00/99
Advertising and Media Investment 45.9 16.8
Management
Information and Consultancy 13.2 24.4
Public Relations and Public Affairs 13.7 37.0
Branding and Identity, Healthcare 27.2 13.6**
and Specialist Communications
--- ----
TOTAL ENLARGED GROUP 100 19.2
--- ----
** Gross profit up over 22% on a like-for-like basis.
Advertising and Media Investment Management
-------------------------------------------
On a constant currency basis, combined revenue at Ogilvy (including Cole &
Weber and OgilvyOne), J Walter Thompson Company, Conquest and MindShare
rose by almost 22%, whilst operating margins continued to improve.
Ogilvy, J Walter Thompson Company, Conquest and MindShare generated net new
business billings of (POUND)900 million ($1.4 billion), 27% up on that
achieved in the first six months of 1999.
Information and Consultancy
---------------------------
The Group's information and consultancy businesses continued their growth,
with revenues increasing by over 24%, operating profit up over 27% and as a
result improving operating margins.
Public Relations and Public Affairs
-----------------------------------
The Group's public relations and public affairs revenues showed significant
continued growth, rising over 44%, with operating margins at almost 16%
well beyond previous objectives. Hill and Knowlton's revenues rose 29% and
the company continued to improve its operating margins significantly.
Ogilvy Public Relations Worldwide's revenues rose by almost 85%, also with
significant improvement in its operating margin.
Branding and Identity, Healthcare and Specialist Communications
---------------------------------------------------------------
The Group's branding and identity, healthcare and specialist communications
revenues grew by almost 9% over last year with gross margin, a more
accurate indicator of top-line growth, up over 22% on a like-for-like basis
and operating margins improving. Particularly good performance was
registered by several companies in this sector in the first half, including
in promotion and direct marketing by RTCdirect, Einson Freeman,
Perspectives, OgilvyOne and A Eicoff & Company; in branding and identity by
Enterprise IG, Scott Stern, Coley Porter Bell and Banner McBride; in
healthcare by Shire Hall Group; and in other specialist marketing services
by The Henley Centre, JWT Specialized Communications, P.Four Consultancy
and Management Ventures.
Cashflow and Balance Sheet
--------------------------
A summary of the Group's cashflow statement and balance sheet and notes as
at 30 June 2000 are provided in Appendices I and II.
Improved profitability has continued to have a positive effect on the
Group's balance sheet. In the first half of 2000, operating profit was
(POUND)147 million, depreciation (POUND)25 million, interest paid (POUND)22
million, tax paid (POUND)32 million and other cash inflows (POUND)13
million. This resulted in net cash generation of (POUND)131 million for the
first six months of 2000, compared to (POUND)102 million in the comparable
period last year. The Group invested (POUND)30 million in capital
expenditure, (POUND)116 million in cash acquisition payments and
investments and (POUND)46 million in share repurchases and dividends, a
total outflow of (POUND)192 million.
For the twelve months ended 30 June 2000 the net cash generation was
(POUND)265 million which was invested in capital expenditure of (POUND)72
million, cash acquisition payments and investments of (POUND)272 million
and share repurchases and dividends of (POUND)82 million, a total
expenditure of (POUND)426 million. Net debt averaged (POUND)325 million for
the first half of 2000 versus (POUND)189 million for the same period last
year. On 30 June 2000 net bank borrowings were (POUND)292 million against
(POUND)52 million on 30 June 1999.
The Board continues to examine ways of deploying its substantial cashflow
of almost (POUND)240 million per annum to enhance share owner value
particularly given that interest cover is almost seven times. Cashflow and
interest cover will be further improved by the proposed all-equity
acquisition of Y&R. As necessary capital expenditure normally approximates
to 1-1.2x the depreciation charge, the Company has concentrated on
examining possible acquisitions or returning excess capital to share owners
in the form of dividends or share buy-backs.
In the first half of 2000, acquisitions have been completed in advertising
and media investment management in China, Israel, Italy, the Middle East,
Netherlands, Puerto Rico and Spain; in information and consultancy in
Denmark and Sweden; in public relations and public affairs in Poland and
the United States; and in branding and identity, healthcare and specialist
communications - in branding and identity in Australia, Singapore and the
United States; in direct in Australia, Canada, Poland, Spain and the United
Kingdom; and in interactive in Canada, Mexico and the United States.
In addition to increasing the interim dividend by 20% to (POUND)9.3 million
or 1.2p per share, the Company has continued its rolling share buy-back
programme in the first half of the year by repurchasing 4.8 million shares
at an average price of (POUND)9.57 per share and total cost of (POUND)46
million. The Company's objective remains to buy-back approximately
(POUND)100 million - (POUND)150 million of shares each year, equivalent to
1-2% of the ordinary share capital.
wpp.com
-------
The new economy continues to have a significant impact on wpp.com. Despite
the recent correction of stock market valuations of internet businesses on
both sides of the Atlantic, web revenues continue to grow strongly. In
particular, traditional brands have increased their efforts and their
expenditure as they come to terms with the challenges and opportunities
offered by the new technologies. Work with traditional clients and with
some of their spin-offs continues to provide much of the growth in our
interactive business. Demand from traditional clients has allowed us to be
selective in choosing the start-ups we work with and to pick those that we
feel are well funded with a compelling offer.
Narrowly defined web revenues for the half year - confined to web based
work and excluding off-line expenditure for on-line brands - grew to over
$90 million. This is well above budget and compares favourably with over
$30 million for the same period in 1999. These figures exclude the
operations of companies such as Syzygy, Concept! and Roundarch in which we
own minority interests. Particularly strong performances were recorded by
OgilvyInteractive, digital@jwt, Research International and Millward Brown
Interactive. Operating margins for these businesses are similar to, or
better than, those of WPP as a whole.
Off-line work for internet start-ups and "clicks and mortar" operations
continued to develop strongly in all regions. Particularly strong growth
was recorded at Ogilvy, AlexanderOgilvy, J Walter Thompson Company, Blanc &
Otus and Enterprise IG. A notable feature has been the growth of
business-to-business clients who now account for over half of our work in
this area. While there has been considerable "churn" amongst start-ups,
demand continues to exceed supply and we have been able to maintain or
increase fee levels. As we suspected, it is growing increasingly difficult
to isolate web-related revenues given that much of the work for clients
involves the total integration of their web and traditional activities. We
estimate that these more broadly defined web revenues - including off-line
spending by on-line brands - have grown by 30% in the first half of the
year to over 15% of total revenues.
We have continued to invest in a range of start-ups in order to better
understand developments and the capabilities we need to develop and widen
the offer we can make to clients. Investments in the first half have been
made in Inferentia (Italy's leading e-commerce and web consulting company),
Metapack (in e-fulfilment and logistics), Advertising.com (a leader in
targeting on-line media), Imagine (e-crm), Intraspect (knowledge management
software), Red Sheriff (web traffic measurement and the dominant provider
in Australia), Spydre (a Latin American incubator) and BigWords (the US
leader in targeting 18-24 year olds for content and e-commerce).
In addition, a number of acquisitions have been made of companies with
strong technology and web capabilities to strengthen our core operating
brands.
Client Developments in the First Half of 2000
---------------------------------------------
At the end of the half year, the Group worked with over 60 major national
or multi-national clients in three or more functions. This reflects the
increasing opportunities for co-ordination between activities both
nationally and internationally. The Group also works with well over 100
clients in 6 or more countries. The Group now serves more than 300 of the
Fortune 500 and approximately half of the NASDAQ 100. Including associates
the Group currently employs over 39,000 people in 950 offices in 92
countries.
The Group estimates that more than 20% 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 has continued to improve in the first half of 2000.
The Company is firing on all cylinders, gaining market share in all
geographic regions including the United States, United Kingdom, Continental
Europe, Asia Pacific and Latin America.
Functionally, advertising and media investment management have accelerated
their top-line growth rates, whilst continuing to improve their operating
profits and margins. Information and consultancy, public relations and
public affairs, branding and identity, healthcare and specialist
communications have continued to improve operating profits and operating
margins at higher levels of revenue and gross margin growth.
Underlying revenue trends are sound with the Group growing faster than the
market and therefore increasing market share. Prospects for the latter half
of 2000 look equally good (early indications are that July revenues are up
over 20% on a constant currency basis) and industry projections for
advertising market growth in 2001 look only slightly lower than 2000 in the
range of 5-6%. Marketing services expenditures will continue to grow at a
faster rate. Continual concerns about stock market valuations and economic
over-heating on both sides of the Atlantic are balanced by the focus of
governments on fiscal restraint and the independence of central banks in
controlling interest rate policies.
Although market conditions are good, plans, budgets and forecasts of
revenues 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. Continued progress is being made in these
areas. For example, on a comparable basis, the combined operating margins
of Ogilvy, J Walter Thompson Company and MindShare rose to 15.6% from 14.6%
in the first half of 2000 compared to the same period in 1999.
In addition to influencing absolute levels of cost, the initiatives taken
by the parent company in the areas of human resources, property,
procurement, information technology and practice development continue to
improve the flexibility of the Group's cost base.
This will become increasingly important if and when economic activity
stalls. Over the last five years fixed staff and property costs have fallen
from 56.7% to 51.8% of revenue.
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, new
technologies, new markets, retailing, internal communications, hi-tech,
financial services and media and entertainment.
The Group continues to concentrate on its objectives of improving operating
profits by 15-20% per annum; improving operating margins by 1 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 20-33 1/3% of incremental revenue
to profit and growing revenue faster than industry averages and encouraging
co-operation between Group companies.
In addition to introducing greater flexibility into its cost structure, the
Group is competitively well positioned to weather any economic uncertainty
because of its stronger financial position, its geographic spread, its
consistent new business record and its competitive strength in information
and consultancy, public relations and public affairs, identity and
branding, healthcare and specialist communications - particularly as
clients decide to spend an increasing proportion of their marketing budgets
on "below-the-line" activities.
The Group is in line to achieve its fourth margin plan target of 14.0% in
2000. Following the announcement of the merger with Y&R, a fifth margin
plan was announced to increase operating margins to 15.0% in 2001 and 15.5%
in 2002. This would bring the Group's performance into line with the best
performing competition. Consideration is already being given to a more
ambitious longer-term margin plan beyond 2002.
For further information:
Sir Martin Sorrell }
Paul Richardson } 44-20-7408-2204
Feona McEwan } 1-212-632-2301
WWW.WPP.COM
-----------
This announcement has been filed at the Company Announcements Office of the
London Stock Exchange and is being distributed to all owners of Ordinary
shares and American Depository Receipts. 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 of 1995
introduced in the United States of America. This announcement may contain
forward-looking statements 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.
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.
WPP and Y&R have filed a proxy statement/prospectus and other relevant
documents concerning the merger with the U.S. SEC. INVESTORS ARE URGED TO
READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain the documents free of charge
at the SEC's web-site (www.sec.gov). In addition, documents filed with the
SEC by WPP may be obtained free of charge by contacting WPP c/o WPP Group
USA, Inc., Worldwide Plaza, 309 West 49th Street, New York, NY 10019-7399,
(212) 632-2200. Documents filed with the SEC by Y&R will be available free
of charge by contacting Y&R Inc., Legal Department, 285 Madison Avenue, New
York, NY 10017, (212) 210-3000.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
UNAUDITED CONSOLIDATION INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE, 2000
NOTES SIX MONTHS SIX MONTHS CONSTANT YEAR ENDED
ENDED 30 JUNE ENDED 30 JUNE CURRENCY 31 DECEMBER
2000 1999 +/(-) +/(-) 1999
(POUND)m (POUND)m % % (POUND)m
(note 3)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TURNOVER (GROSS BILLINGS) 5,655.9 4,445.1 +27.2% +26.2% 9,345.9
-----------------------------------------------------------------------------------------------------------------------------------
REVENUE 4 1,209.1 1,017.3 +18.9% +17.9% 2,172.6
-----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,071.1 861.2 +24.4% +23.5% 1,855.3
Operating costs (924.6) (740.6) -24.8% -23.8% (1,591.8)
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT 146.5 120.6 +21.5% +21.8% 263.5
Income from associates 14.2 8.3 +71.1% +76.7% 27.3
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 160.7 128.9 +24.7% +25.3% 290.8
Net interest payable and similar charges (23.0) (16.3) -41.1% -39.0% (35.4)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 137.7 112.6 +22.3% +23.2% 255.4
Tax on profit on ordinary activities 5 (41.3) (34.9) -18.3% -19.2% (76.6)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 96.4 77.7 +24.1% +25.0% 178.8
Minority interests (3.3) (2.4) -37.5% -37.5% (6.0)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ATTRIBUTABLE TO ORDINARY SHARE OWNERS 93.1 75.3 +23.6% +24.6% 172.8
Ordinary dividends 6 (9.3) (7.8) +19.2% +21.3% (24.0)
-----------------------------------------------------------------------------------------------------------------------------------
RETAINED PROFIT FOR THE PERIOD 83.8 67.5 +24.1% +25.0% 148.8
===================================================================================================================================
PBIT MARGIN* 13.3% 12.7% +0.6% +0.7% 13.4%
-----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Basic earnings per ordinary share 7 12.3p 10.0p +23.0% +23.8% 22.9p
Diluted earnings per ordinary share 7 12.0p 9.8p +22.4% +23.5% 22.5p
-----------------------------------------------------------------------------------------------------------------------------------
ORDINARY DIVIDEND PER SHARE - interim 6 1.2p 1.0p +20.0% +20.0% 1.0p
- final - - - - 2.1p
-----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER ADR**
Basic earnings per ADR $0.97 $0.81 +19.8% +19.8% $ 1.85
Diluted earnings per ADR $0.94 $0.79 +19.0% +19.0% $ 1.82
-----------------------------------------------------------------------------------------------------------------------------------
ORDINARY DIVIDEND PER ADR**
Interim 9.4(cent) 8.1(cent) +16.0% +16.0% 8.1(cent)
Final - - - - 17.0(cent)
===================================================================================================================================
<FN>
* PBIT: Profit on ordinary activities before interest and taxation.
** These figures have been translated for convenience purposes only,
using the profit and loss exchange rate shown in note 3. The
comparative figures have been restated following a change in the ratio
of ordinary shares per ADR from 10 ordinary shares per ADR to 5
ordinary shares per ADR.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
UNAUDITED SUMMARY INTERIM CONSOLIDATED CASH FLOW
STATEMENT FOR THE PERIOD ENDED 30 JUNE, 2000
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
30 JUNE 2000 30 JUNE 1999 31 DECEMBER 1999
(POUND)m (POUND)m (POUND)m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF OPERATING PROFIT TO
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES:
Operating profit 146.5 120.6 263.5
Depreciation charge 24.8 19.7 42.2
Movements in working capital and provisions (309.0) (202.9) 42.8
--------------------------------------------------------------------------------------------------------------------------------
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (137.7) (62.6) 348.5
DIVIDENDS RECEIVED FROM ASSOCIATES 3.2 1.8 4.3
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (23.9) (13.9) (37.1)
UNITED KINGDOM AND OVERSEAS TAX PAID (31.5) (31.6) (58.4)
Purchase of tangible fixed assets (29.9) (22.1) (64.6)
Purchase of own shares by ESOP Trust (46.2) (4.1) (17.9)
Other movements 3.2 1.6 2.0
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (72.9) (24.6) (80.5)
Cash consideration for acquisitions (97.8) (57.3) (242.2)
Less cash acquired 2.0 3.3 51.8
Net purchase of other investments (20.3) - (11.8)
TOTAL ACQUISITIONS (116.1) (54.0) (202.2)
---------------------------------------------------------------------------------------------------------------------------------
EQUITY DIVIDENDS PAID - - (21.1)
---------------------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW BEFORE FINANCING (378.9) (184.9) (46.5)
Increase in drawings on bank loans 100.3 42.3 258.0
Proceeds from issue of shares 8.2 4.0 12.0
---------------------------------------------------------------------------------------------------------------------------------
NET CASH INFLOW FROM FINANCING 108.5 46.3 270.0
---------------------------------------------------------------------------------------------------------------------------------
(DECREASE)/INCREASE IN CASH AND OVERDRAFTS FOR THE PERIOD (270.4) (138.6) 223.5
Translation difference 8.0 6.8 (0.6)
BALANCE OF CASH AND OVERDRAFTS AT BEGINNING OF PERIOD 551.4 328.5 328.5
---------------------------------------------------------------------------------------------------------------------------------
BALANCE OF CASH AND OVERDRAFTS AT END OF PERIOD 289.0 196.7 551.4
---------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS:
(Decrease)/increase in cash and overdrafts for the period (270.4) (138.6) 223.5
Cash inflow from debt financing (100.3) (42.3) (258.0)
Other movements (0.8) (0.7) (1.7)
Translation difference (12.4) (5.1) (6.2)
---------------------------------------------------------------------------------------------------------------------------------
Movement of net funds in the period (383.9) (186.7) (42.4)
Net funds at beginning of period 91.9 134.3 134.3
---------------------------------------------------------------------------------------------------------------------------------
Net (debt)/funds at end of period (Note 11) (292.0) (52.4) 91.9
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
Unaudited consolidated balance sheet as at 30 June, 2000
-----------------------------------------------------------------------------------------------------------------------------------
30 JUNE 30 JUNE 31 DECEMBER
NOTES 2000 1999 1999
(POUND)m (POUND)m (POUND)m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets:
Corporate brands 350.0 350.0 350.0
Goodwill 8 511.0 204.1 410.3
Tangible assets 211.1 178.1 196.7
Investments 8 448.9 290.7 356.9
-----------------------------------------------------------------------------------------------------------------------------------
1,521.0 1,022.9 1,313.9
CURRENT ASSETS
Stocks and work in progress 198.1 140.2 113.5
Debtors 1,336.3 1,058.0 1,040.4
Debtors within working capital facility:
Gross debts 396.3 326.0 345.7
Non-returnable proceeds (228.1) (219.5) (214.1)
--------- --------- ---------
168.2 106.5 131.6
Cash at bank and in hand 395.9 302.7 607.0
-----------------------------------------------------------------------------------------------------------------------------------
2,098.5 1,607.4 1,892.5
CREDITORS: amounts falling due within one year 9 (2,404.2) (1,846.6) (2,148.0)
-----------------------------------------------------------------------------------------------------------------------------------
NET CURRENT LIABILITIES (305.7) (239.2) (255.5)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,215.3 783.7 1,058.4
CREDITORS: amounts falling due after more than one year 10 (754.9) (468.6) (652.5)
PROVISIONS FOR LIABILITIES AND CHARGES (75.7) (80.0) (79.2)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS 384.7 235.1 326.7
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Share capital 77.9 77.0 77.5
Reserves 296.6 149.6 240.7
-----------------------------------------------------------------------------------------------------------------------------------
SHARE OWNERS' FUNDS 374.5 226.6 318.2
Minority interests 10.2 8.5 8.5
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL EMPLOYED 384.7 235.1 326.7
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
UNAUDITED RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHARE OWNERS' FUNDS FOR THE PERIOD ENDED 30 JUNE 2000
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
30 JUNE 2000 30 JUNE 1999 31 DECEMBER 1999
(POUND)m (POUND)m (POUND)m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit for the period 93.1 75.3 172.8
Ordinary dividends payable (9.3) (7.8) (24.0)
-----------------------------------------------------------------------------------------------------------------------------------
83.8 67.5 148.8
Exchange adjustments on foreign currency net investments (36.1) (33.4) (31.2)
Other movements 8.6 4.8 12.9
-----------------------------------------------------------------------------------------------------------------------------------
NET ADDITIONS TO SHARE OWNERS' FUNDS 56.3 38.9 130.5
OPENING SHARE OWNERS' FUNDS 318.2 187.7 187.7
-----------------------------------------------------------------------------------------------------------------------------------
CLOSING SHARE OWNERS' FUNDS 374.5 226.6 318.2
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
UNAUDITED STATEMENT OF CONSOLIDATED RECOGNISED GAINS AND LOSSES FOR THE PERIOD ENDED 30 JUNE, 2000
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
30 JUNE 2000 30 JUNE 1999 31 DECEMBER 1999
(POUND)m (POUND)m (POUND)m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit for the period 93.1 75.3 172.8
Exchange adjustments on foreign currency
net investments (36.1) (33.4) (31.2)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RECOGNISED GAINS 57.0 41.9 141.6
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WPP GROUP PLC
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF ACCOUNTING
The consolidated interim financial statements are prepared under the
historical cost convention.
2. ACCOUNTING POLICIES
The consolidated interim financial statements comply with relevant
accounting standards and have been prepared using accounting policies set
out on pages 56 and 57 of the Group's 1999 Annual Report and Accounts.
The policies set out in the 1999 Annual Report and Accounts are in
accordance with accounting principles generally accepted in the United
Kingdom (UK GAAP).
3. CURRENCY CONVERSION
The 2000 unaudited interim consolidated profit and loss account is prepared
using, among other currencies, an average exchange rate of US$ 1.5700 to
the pound (period ended 30 June, 1999: US$1.6197; year ended 31 December,
1999 US$1.6178). The balance sheet as at 30 June, 2000 has been prepared
using the exchange rate on that day of US$ 1.5166 to the pound (30 June,
1999: US$1.5763; 31 December, 1999: US$1.6182).
The constant currency percentage changes shown on the face of the profit
and loss account have been calculated by applying 2000 exchange rates to
the results for 1999 and 2000.
The unaudited preliminary consolidated profit and loss account and balance
sheet are presented in Euros in Appendix II for illustrative purposes. The
unaudited interim consolidated profit and loss account is prepared using an
average exchange rate of (Euro) 1.6347 to the pound (period ended 30 June,
1999: (Euro) $1.5372; year ended 31 December 1999: (Euro) 1.5202). The
balance sheet as at 30 June, 2000 has been prepared using the exchange rate
on the day of (Euro) 1.5870 to the pound (30 June, 1999: (Euro) 1.5285; 31
December, 1999: (Euro) 1.6056).
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
4. SEGMENTAL ANALYSIS
Reported contributions by geographical area were as follows:
------------------------------------------------------------------------------------------------------------
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
(POUND)M (POUND)M (POUND)M
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
United Kingdom 234.9 212.0 434.7
United States 531.6 432.4 915.2
Continental Europe 218.7 199.1 426.2
Canada, Asia Pacific, Latin America, Africa
& Middle East 223.9 173.8 396.5
------------------------------------------------------------------------------------------------------------
1,209.1 1,017.3 2,172.6
============================================================================================================
PBIT[FN]1
United Kingdom 28.1 25.2 51.5
United States 86.3 68.0 139.0
Continental Europe 28.1 25.0 55.8
Canada, Asia Pacific, Latin America, Africa
& Middle East 18.2 10.7 44.5
------------------------------------------------------------------------------------------------------------
160.7 128.9 290.8
============================================================================================================
Reported contributions by operating sector were as follows:
------------------------------------------------------------------------------------------------------------
<CAPTION>
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
(POUND)M (POUND)M (POUND)M
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Advertising, media investment management 556.6 477.2 1,013.1
Information and consultancy 239.5 191.9 419.7
Public relations and public affairs 121.7 82.8 178.9
Branding and identity, healthcare and specialist
communications 291.3 265.4 560.9
------------------------------------------------------------------------------------------------------------
1,209.1 1,017.3 2,172.6
============================================================================================================
PBIT[FN]1
Advertising, media investment management 84.5 69.2 155.9
Information and consultancy 22.5 18.0 42.1
Public relations and public affairs 18.7 11.6 23.9
Branding and identity, healthcare and
specialist communications 35.0 30.1 68.9
------------------------------------------------------------------------------------------------------------
160.7 128.9 290.8
============================================================================================================
<FN>
1 PBIT: Profit on ordinary activities before interest and taxation.
</FN>
</TABLE>
<PAGE>
5. TAXATION
The Group tax rate on profit on ordinary activities before taxation is 30%
(30 June, 1999: 31%; year ended 31 December, 1999: 30%). The tax charge
relates mainly to overseas operations, except for (POUND)5.8 million in
respect of UK corporation tax and (POUND)3.1 million in respect of
associated companies.
6. INTERIM DIVIDEND
An interim dividend of 1.2p (1999: 1.0p) per ordinary share has been
declared by the Board. This is expected to be paid on 20 November 2000 to
share owners on the register at 15 September 2000.
7. EARNINGS PER SHARE
(a) Basic earnings per share have been calculated using earnings
of(POUND)93.1 million (30 June, 1999:(POUND)75.3 million; year ended
31 December, 1999:(POUND)172.8 million) and weighted average shares in
issue during the six months to 30 June, 2000 of 757,499,254 shares (30
June, 1999: 752,798,633 shares; year ended 31 December, 1999:
753,324,054 shares).
(b) Diluted earnings per share have been calculated using earnings
of(POUND)93.1 million (30 June, 1999:(POUND)75.3 million; year ended
31 December, 1999:(POUND)172.8 million) on a weighted average of
775,155,818 shares (30 June, 1999: 768,181,423 shares; year ended 31
December, 1999: 768,691,993 shares). This takes into account the
exercise of employee share options where these are expected to dilute
earnings.
(c) At 30 June, 2000 there were 778,921,600 ordinary shares in issue.
<PAGE>
8. GOODWILL
Total goodwill of (POUND)117.4 million arising during the period includes
(POUND)100.7 million in respect of acquisitions of subsidiary undertakings.
In addition, investments include (POUND)16.7 million of goodwill in respect
of associate undertakings acquired during the period.
Cash paid in respect of these acquisitions was (POUND)97.8 million (30 June
1999:(POUND)57.3 million and 31 December, 1999:(POUND)242.2 million).
Future anticipated payments to vendors totalled (POUND)179.5 million (30
June, 1999:(POUND)97.2 million; 31 December, 1999: (POUND)172.4 million),
based on the directors' best estimates of future obligations, which are
dependent on future performance of the interests acquired.
These acquisitions do not have a significant impact on the Group's results
for the six months to 30 June 2000.
9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
The following are included in creditors falling due within one year:
<TABLE>
<CAPTION>
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
---- ---- ----
(POUND)M (POUND)M (POUND)M
<S> <C> <C> <C>
Bank loans and overdrafts 230.8 105.9 148.3
Trade creditors 1,416.7 1,160.5 1,315.0
Corporate income tax payable 37.8 58.7 34.6
Deferred income 137.5 103.6 125.8
Payments due to vendors (note 8) 52.6 6.1 41.2
Other creditors and accruals 528.8 411.8 483.1
------- ------- -------
2,404.2 1,846.6 2,148.0
======= ======= =======
Overdraft balances included within bank loans and overdrafts amount to
(POUND)106.9 million (30 June, 1999:(POUND)105.9 million; 31 December,
1999:(POUND)55.6 million).
</TABLE>
<PAGE>
10. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
The following are included in creditors falling due after more than one
year:
<TABLE>
<CAPTION>
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
---- ---- ----
(POUND)M (POUND)M (POUND)M
<S> <C> <C> <C>
Corporate bond and bank loans 457.1 249.2 366.8
Corporate income taxes payable 125.9 99.2 122.9
Payments due to vendors (note 8) 126.9 91.1 131.2
Other creditors and accruals 45.0 29.1 31.6
----- ---- ------
754.9 468.6 652.5
===== ===== ======
The corporate bond, bank loans and overdrafts included within short and
long term creditors fall due for repayment as follows:
<CAPTION>
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
---- ---- ----
(POUND)M (POUND)M (POUND)M
<S> <C> <C> <C>
Within one year 230.8 105.9 148.3
Between 1 and 2 years - - -
Between 2 and 5 years 261.0 60.8 183.1
Over 5 years 196.1 188.4 183.7
----- ----- -----
687.9 355.1 515.1
===== ===== =====
</TABLE>
11. NET (DEBT)/FUNDS
<TABLE>
<CAPTION>
30 JUNE 30 JUNE 31 DECEMBER
2000 1999 1999
---- ---- ----
(POUND)M (POUND)M (POUND)M
<S> <C> <C> <C>
Cash at bank and in hand 395.9 302.7 607.0
Bank loans and overdrafts due within one year (230.8) (105.9) (148.3)
(note 9)
Corporate bond and loans due after one year (note 10) (457.1) (249.2) (366.8)
------- ------ -------
Net (debt)/funds (292.0) (52.4) 91.9
======= ======= =======
</TABLE>
12. POST BALANCE SHEET EVENT
Since 30 June 2000, the Group has entered into a further Revolving Credit
Facility for US$700 million. This facility has a 364 day maturity. Under
this agreement the Group has the ability to draw funds for a period of up
to 3 years from the date of the agreement. This facility is subject to
share owners' approval.
Borrowings under the Revolving Credit Facility are governed by certain
financial covenants based on the results and financial position of the
Group.
13. STATUTORY INFORMATION AND AUDIT REVIEW
The results for the six months to 30 June, 2000 and 1999 do not constitute
statutory accounts. The statutory accounts for the year ended 31 December,
1999 received an unqualified auditors' report and have been filed with the
Registrar of Companies. The interim financial statements are unaudited but
have been reviewed by the auditors and their report to the directors is set
out below.
<PAGE>
INDEPENDENT REVIEW REPORT TO WPP GROUP PLC
INTRODUCTION
We have been instructed by the company to review the financial information
set out on pages 11 to 20 and 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.
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 and applicable
United Kingdom accounting standards. The Listing Rules require that the
accounting policies and presentation applied to the interim figures should
be consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reason for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued in the United Kingdom by the Auditing Practices Board and
with our profession's ethical guidance. A review consists principally of
making enquiries of group management and applying analytical procedures to
the financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
REVIEW CONCLUSION
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 30 June 2000.
ARTHUR ANDERSEN
Chartered Accountants
London
14 August 2000
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
APPENDIX II
PRELIMINARY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE, 2000
UNAUDITED PRELIMINARY CONSOLIDATED PROFIT & LOSS ACCOUNT FOR
THE SIX MONTHS ENDED 30 JUNE, 2000
PRESENTED IN EUROS FOR ILLUSTRATIVE PURPOSES ONLY
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
30 JUNE 2000 30 JUNE 1999 31 DECEMBER 1999
(EURO)M (EURO)M (EURO)M
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TURNOVER (GROSS BILLINGS) 9,245.7 6,833.0 14,207.6
-----------------------------------------------------------------------------------------------------------------------------------
REVENUE 1,976.5 1,563.8 3,302.8
-----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,750.9 1,323.8 2,820.4
Operating costs (1,511.4) (1,138.4) (2,419.8)
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT 239.5 185.4 400.6
Income from associates 23.2 12.7 41.5
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 262.7 198.1 442.1
Net interest payable and similar charges (37.6) (25.0) (53.8)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 225.1 173.1 388.3
Tax on profit on ordinary activities (67.5) (53.6) (116.5)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 157.6 119.5 271.8
-----------------------------------------------------------------------------------------------------------------------------------
Minority interests (5.4) (3.7) (9.1)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ATTRIBUTABLE TO ORDINARY SHARE OWNERS 152.2 115.8 262.7
Ordinary dividends (15.2) (12.0) (36.5)
-----------------------------------------------------------------------------------------------------------------------------------
RETAINED PROFIT FOR THE PERIOD 137.0 103.8 226.2
===================================================================================================================================
EARNINGS PER SHARE (NET BASIS)
Basic earnings per ordinary share 20.1(cent) 15.4(cent) 34.8(cent)
-----------------------------------------------------------------------------------------------------------------------------------
ORDINARY DIVIDEND PER SHARE - interim 1.96(cent) 1.54(cent) 1.52(cent)
- final - - 3.19(cent)
===================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WPP GROUP PLC
UNAUDITED PRELIMINARY CONSOLIDATED BALANCE SHEET AS AT 30 JUNE, 2000
PRESENTED IN EUROS FOR ILLUSTRATIVE PURPOSES ONLY
-----------------------------------------------------------------------------------------------------------------------------------
30 JUNE 2000 30 JUNE 1999 31 DECEMBER 1999
(EURO)M (EURO)M (EURO)M
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets:
Corporate brands 555.5 535.0 561.9
Goodwill 811.0 312.0 658.8
Tangible assets 335.0 272.2 315.8
Investments 712.3 444.3 573.0
-----------------------------------------------------------------------------------------------------------------------------------
2,413.8 1,563.5 2,109.5
CURRENT ASSETS
Stocks and work in progress 314.4 214.3 182.2
Debtors 2,120.7 1,617.2 1,670.5
Debtors within working capital facility:
Gross debts 628.9 498.3 555.1
Non-returnable proceeds (362.0) (335.5) (343.8)
------- ------- -------
266.9 162.8 211.3
Cash at bank and in hand 628.3 462.7 974.6
-----------------------------------------------------------------------------------------------------------------------------------
3,330.3 2,457.0 3,038.6
CREDITORS: amounts falling due within one year (3,815.5) (2,822.5) (3,448.8)
-----------------------------------------------------------------------------------------------------------------------------------
NET CURRENT LIABILITIES (485.2) (365.5) (410.2)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,928.6 1,198.0 1,699.3
CREDITORS: amounts falling due after more than one year (1,198.0) (716.3) (1,047.7)
PROVISIONS FOR LIABILITIES AND CHARGES (120.1) (122.3) (127.2)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS 610.5 359.4 524.4
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Share capital 123.6 117.7 124.4
Reserves 470.7 228.7 386.4
-----------------------------------------------------------------------------------------------------------------------------------
SHARE OWNERS' FUNDS 594.3 346.4 510.8
Minority interests 16.2 13.0 13.6
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL EMPLOYED 610.5 359.4 524.4
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX III
ILLUSTRATIVE UNAUDITED PRO FORMA WPP/Y&R CONSOLIDATED FINANCIAL INFORMATION
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
WPP Y&R Combined WPP Y&R Combined
UK GAAP UK GAAP UK GAAP UK GAAP
(POUND)m (POUND)m (POUND)m (POUND)m (POUND)m (POUND)m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE 1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
-----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,071.1 600.8 1,671.9 861.2 492.8 1,354.0
Operating costs (924.6) (524.1) (1,448.7) (740.6) (436.1) (1,176.7)
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT PRE EXCEPTIONAL CHARGE 146.5 76.7 223.2 120.6 56.7 177.3
Exceptional operating charge - (36.7) (36.7) - - -
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT 146.5 40.0 186.5 120.6 56.7 177.3
Income from associates 14.2 2.4 16.6 8.3 2.3 10.6
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE 160.7 42.4 203.1 128.9 59.0 187.9
INTEREST AND TAXATION
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE 160.7 79.1 239.8 128.9 59.0 187.9
INTEREST, TAX AND EXCEPTIONAL CHARGE
-----------------------------------------------------------------------------------------------------------------------------------
Net interest payable and similar (23.0) (5.2) (28.2) (16.3) (2.7) (19.0)
charges
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE 137.7 37.2 174.9 112.6 56.3 168.9
TAXATION
Tax on profit on ordinary activities (41.3) (28.9) (70.2) (34.9) (21.1) (56.0)
Exceptional tax credit arising on - 18.1 18.1 - 12.8 12.8
exercised stock options
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION 96.4 26.4 122.8 77.7 48.0 125.7
Minority interests (3.3) (0.9) (4.2) (2.4) (0.2) (2.6)
-----------------------------------------------------------------------------------------------------------------------------------
PROFIT ATTRIBUTABLE TO ORDINARY
SHARE OWNERS 93.1 25.5 118.6 75.3 47.8 123.1
Ordinary dividends (9.3) (2.3) (11.6) (7.8) (1.1) (8.9)
-----------------------------------------------------------------------------------------------------------------------------------
RETAINED PROFIT FOR THE PERIOD 83.8 23.2 107.0 67.5 46.7 114.2
===================================================================================================================================
PBIT* margin 13.3% 13.2% 13.2% 12.7% 12.0% 12.4%
-----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Diluted earnings per ordinary share 12.0p n/a 10.6p 9.8p n/a 11.1p
Diluted earnings per ordinary share pre
exceptional items 12.0p n/a 12.2p 9.8p n/a 9.9p
===================================================================================================================================
<FN>
* PBIT: Profit on ordinary activities before interest and taxation,
excluding exceptional operating charge.
</FN>
</TABLE>
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED WPP GROUP PLC
The following unaudited pro forma profit and loss account for the six
months 30 June 1999 and 2000 (the "Unaudited pro forma Financial
Information") for WPP Group plc have been prepared for illustrative
purposes only to show the effects of the combination with Y&R as if it had
occurred at 1 January 1999 for the six months ended 30 June 1999 and 1
January 2000 for the six months ended 30 June 2000. Because of its nature,
the Unaudited pro forma Financial Information may not give a true picture
of the financial position of WPP Group plc. It has been prepared in
accordance with the Listing Rules.
The financial information for Y&R for the six months ended 30 June 1999 and
2000 is based on the unaudited results extracted from Y&R's form 10-Q filed
with the SEC on 3 August 2000, prepared in accordance with US GAAP adjusted
to reflect WPP's accounting policies under UK GAAP
2. RECLASSIFICATIONS
Reclassifications have been made to Y&R's historical financial information
presented under US GAAP to conform to WPP's presentation and disclosed
accounting policies under UK GAAP. None of these reclassifications impact
net profit.
The reclassifications that impacts the profit and loss account is:
EQUITY ACCOUNTING
In accordance with UK GAAP, the investor's share of operating profit or
loss of associated undertakings and joint ventures is shown separately on
the face of the profit and loss account and the investor's share of the
taxation charge of associated undertakings and joint ventures is included
within the taxation charge shown in the profit and loss account. Under US
GAAP, net after-tax profits or losses are included in the income statement
as a single line item.
3. US TO UK GAAP ADJUSTMENTS
Accounting principles generally accepted in the UK differ in certain
material respects from those generally accepted in the US. The differences
which are material to restating the historical consolidated financial
information of Y&R to conform to WPP's disclosed accounting policies under
UK GAAP are set out below.
(A) GOODWILL
In accordance with UK GAAP and FRS 10 "Goodwill and Intangible Assets,"
goodwill resulting from acquisitions made by Y&R on or after 1 January 1998
has been capitalised as an intangible asset. Under WPP's disclosed
accounting policy this goodwill has an indefinite life and as a result no
amortisation has been provided. Under UK GAAP, goodwill assumed to have an
indefinite life is subject to an annual impairment review in accordance
with FRS 11 "Impairment of Fixed Assets and Goodwill".
Under US GAAP, goodwill resulting from a business combination accounted for
as a purchase is amortised over its estimated useful life, not to exceed 40
years. Additionally, Y&R's management evaluates the carrying value of Y&R's
tangible and intangible assets each year, or whenever events or
circumstances indicate that these assets may be impaired. Intangible assets
are determined to be impaired if the future anticipated undiscounted cash
flows arising from the use of the intangible assets are less than their
carrying value. If an impairment is deemed to have occurred, the asset is
written down to its fair value. The impact of this adjustment is to
increase operating profit by $10.9m ((POUND)6.9m).
(B) NON-OPERATING ITEMS
For the six months to 30 June 2000 in accordance with US GAAP, Y&R
recognised gains largely relating to the sale of certain assets and rights
known as Y&R TeamSpace in exchange for an ownership interest in eMotion
Inc. and other net gains on investing activities largely relating to
additional consideration received from Luminant. Under UK GAAP, these gains
would be included in the statement of total recognised gains and losses
which has not been separately presented. The impact of this adjustment is
to reduce profit on ordinary activities by $12.2m ((POUND)7.8m).
(C) DEFERRED TAXES
Under UK GAAP, deferred tax assets are accounted for only to the extent
that it is considered probable that a liability or asset will crystallise
in the foreseeable future. Under US GAAP, deferred taxes are accounted for
on all timing differences and a valuation allowance is established in
respect of those deferred tax assets where it is more likely than not that
some portion will remain unrealised. This reduces the tax charge in the
profit and loss account by $28.4m ((POUND)18.1m) under UK GAAP.
(D) TREASURY STOCK
Under UK GAAP, if repurchased Treasury stock is used for the purpose of
satisfying the Company's obligation upon exercise of stock options issued
to employees, the Company should record as an operating cost, the excess of
the cost of repurchasing the treasury stock over the proceeds received from
employees on exercising stock options. Under US GAAP, this is recorded as a
reduction in equity. For the six months ended 30 June 2000, under UK GAAP,
this results in a charge of $57.6 ((POUND)36.7m) million which has been
reflected as an operating exceptional item within this restatement. For
prior years, the difference between the proceeds on exercise of employee
share options less the cost of satisfying these options is not material.
4. SEGMENTAL INFORMATION
The tables below present unaudited pro forma segment information, including
Y&R segments presented to conform with the segments as reported by WPP and
to UK GAAP. "PBIT" means profit on ordinary activities before interest and
taxation, excluding exceptional operating charge.
<TABLE>
<CAPTION>
INFORMATION BY DISCIPLINE
REVENUE BY DISCIPLINE - POUND STERLING INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
(POUND)M --------------------------------------- -------------------------------------
------------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising & Media 556.6 274.3 830.9 477.2 232.7 709.9
Investment Management
Information & Consultancy 239.5 - 239.5 191.9 - 191.9
Public Relations & Public 121.7 125.4 247.1 82.8 95.3 178.1
Affairs
Branding & Identity, 291.3 201.1 492.4 265.4 164.8 430.2
Healthcare &
Specialist-Communications
-----------------------------------------------------------------------------------
1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PBIT[FN*] BY DISCIPLINE - POUND STERLING INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
(POUND)M ------------------------------------------ ------------------------------------
------------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising & Media 84.5 43.7 128.2 69.2 30.0 99.2
Investment Management
Information & Consultancy 22.5 - 22.5 18.0 - 18.0
Public Relations & Public 18.7 17.4 36.1 11.6 8.6 20.2
Affairs
Branding & Identity, 35.0 18.0 53.0 30.1 20.4 50.5
Healthcare &
Specialist-Communications
-----------------------------------------------------------------------------------
160.7 79.1 239.8 128.9 59.0 187.9
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<FN>
* PBIT: Profit on ordinary activities before interest and taxation,
excluding exceptional operating charge.
</FN>
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE BY DISCIPLINE - U.S. DOLLAR INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
($)M ----------------------------------------- -----------------------------------
------------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising & Media 873.8 430.7 1,304.5 773.0 377.0 1,150.0
Investment Management
Information & Consultancy 376.0 - 376.0 310.8 - 310.8
Public Relations & Public 191.1 196.9 388.0 134.1 154.3 288.4
Affairs
Branding & Identity, 457.3 315.7 773.0 429.8 266.9 696.7
Healthcare &
Specialist-Communications
-----------------------------------------------------------------------------------
1,898.2 943.3 2,841.5 1,647.7 798.2 2,445.9
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PBIT* BY DISCIPLINE U.S. DOLLAR INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
($)M -------------------------------------------- -----------------------------------
---------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising & Media 132.8 68.7 201.5 112.1 48.6 160.7
Investment Management
Information & Consultancy 35.3 - 35.3 29.1 - 29.1
Public Relations & Public 29.3 27.4 56.7 18.7 14.0 32.7
Affairs
Branding & Identity, 54.9 28.2 83.1 48.9 33.0 81.9
Healthcare &
Specialist-Communications
-----------------------------------------------------------------------------------
252.3 124.3 376.6 208.8 95.6 304.4
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<FN>
* PBIT: Profit on ordinary activities before interest and taxation,
excluding exceptional operating charge.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INFORMATION BY GEOGRAPHY
REVENUE BY GEOGRAPHY - POUND STERLING INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
(POUND)M ---------------------------------------- -----------------------------------
------------------------------ WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America 553.6 331.2 884.8 452.1 276.5 728.6
UK 234.9 55.1 290.0 212.0 45.3 257.3
Continental Europe 218.7 134.9 353.6 199.1 125.3 324.4
Asia Pacific, Latin 201.9 79.6 281.5 154.1 45.7 199.8
America, Africa & Middle
East
-----------------------------------------------------------------------------------
1,209.1 600.8 1,809.9 1,017.3 492.8 1,510.1
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PBIT[FN*] BY GEOGRAPHY - POUND STERLING INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
(POUND)M ---------------------------------------- -----------------------------------
------------------------------ WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America 88.1 55.6 143.7 70.3 47.2 117.5
UK 28.1 -0.2 27.9 25.2 1.0 26.2
Continental Europe 28.1 16.7 44.8 25.0 9.5 34.5
Asia Pacific, Latin 16.4 7.0 23.4 8.4 1.3 9.7
America, Africa & Middle
East
-----------------------------------------------------------------------------------
160.7 79.1 239.8 128.9 59.0 187.9
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<FN>
* PBIT: Profit on ordinary activities before interest and taxation,
excluding exceptional operating charge.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE BY GEOGRAPHY - U.S. DOLLAR INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
($)M ---------------------------------------- -----------------------------------
------------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America 869.2 520.1 1,389.3 732.2 447.8 1,180.0
UK 368.7 86.5 455.2 343.4 73.4 416.8
Continental Europe 343.3 211.8 555.1 322.5 202.9 525.4
Asia Pacific, Latin 317.0 124.9 441.9 249.6 74.1 323.7
America, Africa & Middle
East
-----------------------------------------------------------------------------------
1,898.2 943.3 2,841.5 1,647.7 798.2 2,445.9
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PBIT[FN*] BY GEOGRAPHY - U.S. DOLLAR INFORMATION
-----------------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
($)M -------------------------------------------- ------------------------------------
------------------------------- WPP Y&R COMBINED WPP Y&R COMBINED
UK GAAP UK GAAP UK GAAP UK GAAP
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America 138.3 87.4 225.7 113.9 76.4 190.3
UK 44.2 -0.3 43.9 40.8 1.7 42.5
Continental Europe 44.1 26.2 70.3 40.5 15.4 55.9
Asia Pacific, Latin 25.7 11.0 36.7 13.6 2.1 15.7
America, Africa & Middle
East
-----------------------------------------------------------------------------------
252.3 124.3 376.6 208.8 95.6 304.4
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<FN>
* PBIT: Profit on ordinary activities before interest and taxation, excluding exceptional operating charge.
</FN>
</TABLE>
5. TRANSLATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
Solely for convenience, the unaudited pro forma information is shown in
both pounds sterling and US dollars using the approximate average rate for
the periods for the profit and loss account (2000: $1.57 = (POUND)1, 1999:
$1.6197 = (POUND)1).
6. DILUTED EARNINGS
The number is shares used in the calculation of unaudited pro forma
earnings per share are based on the average weighted number of WPP shares
during the respective periods aggregated with the weighted average number
of Y&R shares during the respective period, multiplied by 4.175 to reflect
the exchange ratio.
Diluted earnings per share takes into account the exercise of WPP employee
share options where these are expected to be diluted, aggregated with the
number of Y&R options expected to dilute, multiplied by 4.175 to reflect
the exchange rate into WPP new shares. The 30 June 2000 calculation also
includes the dilutive impact of the Y&R convertible loan stock.
<PAGE>
<TABLE>
<CAPTION>
DILUTED NUMBER OF SHARES (MILLION)
---------------------------------------------------------------------------
SIX MONTHS ENDED 30 JUNE 2000 SIX MONTHS ENDED 30 JUNE 1999
-------------------------------- -------------------------------
WPP Y&R PRO FORMA WPP Y&R PRO FORMA
----------------------------------
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average 775.2 86.4 n/a 768.2 82.0 n/a
Multiplication factor n/a 4.175 n/a n/a 4.175 n/a
Weighted average, new WPP 775.2 360.7 1,135.9 768.2 342.4 1,110.6
shares
---------------------------------------------------------------------------------------------------------------
</TABLE>
Unaudited pro forma diluted earnings per share have been calculated using
unaudited pro forma earnings of (POUND)120.1m (1999: (POUND)123.1m) which
includes (POUND)1.5m in respect of the Y&R convertible loan stock in 2000
(1999: nil).
Unaudited pro forma diluted earnings per share pre exceptional items has
been calculated using earnings of (POUND)138.7m (1999: (POUND)110.3m) which
reflect the removal of the Y&R exceptional operating charge in respect of
Treasury Stock and the Y&R exceptional tax credits arising on the exercise
of stock options.
