EXHIBIT 99.2
FOR IMMEDIATE RELEASE 14 AUGUST 2000
WPP
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2000 INTERIM RESULTS
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REVENUE UP ALMOST 19% TO (POUND)1.209 BILLION
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PROFIT BEFORE TAX UP OVER 22% TO (POUND)137.7 MILLION AGAINST
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(POUND)112.6 MILLION
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DILUTED EARNINGS PER SHARE UP OVER 22% TO 12.0p FROM 9.8p
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INTERIM ORDINARY DIVIDEND UP 20% TO 1.2p PER SHARE
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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
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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
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Revenue by Region
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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
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TOTAL GROUP 100 17.9
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<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
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TOTAL ENLARGED GROUP 100 19.2
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Revenue by Communications Services Sector and Brand
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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
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TOTAL GROUP 100 17.9
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* 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
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TOTAL ENLARGED GROUP 100 19.2
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** Gross profit up over 22% on a like-for-like basis.
Advertising and Media Investment Management
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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
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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
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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
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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
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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.
