REG - WPP PLC - 2014 Interim Results <Origin Href="QuoteRef">WPP.L</Origin> - Part 3
29/10/2014 15:04
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clients.
Notes to the unaudited condensed consolidated interim financial statements (continued)
10. Analysis of cash flows (continued)
Share repurchases and buybacks:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Purchase of own shares by ESOP Trusts (74.0) (115.5) (179.4)
Shares purchased into treasury (316.2) (17.6) (17.6)
(390.2) (133.1) (197.0)
Net (decrease)/increase in borrowings:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Increase in drawings on bank loans 201.5 - -
Repayment of $369 million bonds (235.3) - -
Proceeds from issue of E750 million bonds - - 624.8
Proceeds from issue of $500 million bonds - - 314.2
Repayment of E600 million bonds - - (502.1)
Repayment of convertible bonds - - (0.1)
(33.8) - 436.8
Cash and cash equivalents:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Cash at bank and in hand 1,064.7 1,327.7 2,099.1
Short-term bank deposits 143.3 97.6 122.5
Overdrafts1 (183.3) (166.7) (338.4)
1,024.7 1,258.6 1,883.2
11. Net debt
£ million 30 June 2014 30 June 2013 31 December 2013
Cash and short-term deposits 1,208.0 1,425.3 2,221.6
Bank overdrafts and loans due within one year (952.5) (994.2) (941.4)
Bonds and bank loans due after one year (3,212.7) (3,148.2) (3,520.6)
(2,957.2) (2,717.1) (2,240.4)
1 Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group's cash
management.
Notes to the unaudited condensed consolidated interim financial statements (continued)
11. Net debt (continued)
The Group estimates that the fair value of corporate bonds is £4,092.3 million at 30 June 2014 (30 June 2013: £4,260.6
million; 31 December 2013: £4,344.9 million). The Group considers that the carrying amount of bank loans approximates their
fair value.
The following table is an analysis of future anticipated cash flows in relation to the Group's debt, on an undiscounted
basis which, therefore, differs from the carrying value:
£ million 30 June 2014 30 June 2013 31 December 2013
Within one year (938.1) (1,027.3) (807.8)
Between one and two years (750.1) (987.7) (575.3)
Between two and three years (711.1) (765.6) (757.5)
Between three and four years (89.4) (480.2) (500.0)
Between four and five years (89.4) (60.2) (92.0)
Over five years (2,832.6) (1,675.8) (2,968.3)
Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes (5,410.7) (4,996.8) (5,700.9)
Short-term overdrafts - within one year (183.3) (166.7) (338.4)
Future anticipated cash flows (5,594.0) (5,163.5) (6,039.3)
Effect of discounting/financing rates 1,428.8 1,021.1 1,577.3
Debt financing (4,165.2) (4,142.4) (4,462.0)
Cash and short-term deposits 1,208.0 1,425.3 2,221.6
Net debt (2,957.2) (2,717.1) (2,240.4)
12. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings decreased by £7.1 million (30 June 2013: increased by £481.0 million) in
the period. This movement includes both goodwill arising on acquisitions completed in the period and adjustments to
goodwill relating to acquisitions completed in prior years, net of the effect of currency translation.
The contribution to revenue and operating profit of acquisitions completed in the period was not material. There were no
material acquisitions completed during the period or between 30 June 2014 and the date the interim financial statements
were approved.
Notes to the unaudited condensed consolidated interim financial statements (continued)
13. Other intangible assets
The following are included in other intangibles:
£ million 30 June 2014 30 June 2013 31 December 2013
Brands with an indefinite useful life 933.4 1,035.3 957.9
Acquired intangibles 635.0 711.3 613.6
Other (including capitalised computer software) 94.2 97.3 96.3
1,662.6 1,843.9 1,667.8
14. Trade and other receivables
Amounts falling due within one year:
£ million 30 June 2014 30 June 2013 31 December 2013
Trade receivables 5,897.9 6,115.4 5,986.5
VAT and sales taxes recoverable 122.1 91.1 82.0
Prepayments 297.1 304.9 251.1
Accrued income 2,482.4 2,433.3 2,282.2
Fair value of derivatives 10.7 58.9 57.9
Other debtors 512.4 491.5 428.4
9,322.6 9,495.1 9,088.1
Amounts falling due after more than one year:
£ million 30 June2014 30 June 2013 31 December 2013
Prepayments 3.6 2.6 3.7
Accrued income 35.2 36.1 20.8
Other debtors 63.9 88.1 78.7
Fair value of derivatives 29.7 84.1 55.3
132.4 210.9 158.5
The Group considers that the carrying amount of trade and other receivables approximates their fair value.
Notes to the unaudited condensed consolidated interim financial statements (continued)
15. Trade and other payables: amounts falling due within one year
£ million 30 June2014 30 June 2013 31 December 2013
Trade payables 7,003.4 7,306.1 7,150.2
Deferred income 947.8 1,027.3 917.8
Payments due to vendors (earnout agreements) 57.5 48.2 49.7
Liabilities in respect of put option agreements with vendors 74.5 62.3 53.5
Fair value of derivatives 25.4 31.9 41.8
Share purchases - close period commitments 76.0 - -
Other creditors and accruals 2,308.7 2,525.2 2,497.7
10,493.3 11,001.0 10,710.7
The Group considers that the carrying amount of trade and other payables approximates their fair value.
16. Trade and other payables: amounts falling due after more than one year
£ million 30 June2014 30 June 2013 31 December 2013
Payments due to vendors (earnout agreements) 203.4 157.4 143.8
Liabilities in respect of put option agreements with vendors 90.9 94.5 85.6
Fair value of derivatives 1.9 103.6 19.9
Other creditors and accruals 215.1 198.0 208.3
511.3 553.5 457.6
The Group considers that the carrying amount of trade and other payables approximates their fair value.
The following table sets out payments due to vendors, comprising deferred consideration and the directors' best estimates
of future earnout-related obligations:
£ million 30 June2014 30 June 2013 31 December2013
Within one year 57.5 48.2 49.7
Between 1 and 2 years 46.4 34.8 26.1
Between 2 and 3 years 61.1 34.2 44.1
Between 3 and 4 years 45.5 48.8 54.0
Between 4 and 5 years 30.9 32.5 12.9
Over 5 years 19.5 7.1 6.7
260.9 205.6 193.5
The Group's approach to payments due to vendors is outlined in note 21.
Notes to the unaudited condensed consolidated interim financial statements (continued)
16. Trade and other payables: amounts falling due after more than one year
(continued)
The following table sets out the movements of deferred and earnout related obligations during the period:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December2013
At the beginning of the period 193.5 194.0 194.0
Earnouts paid (15.3) (7.1) (27.7)
New acquisitions 61.9 22.9 51.9
Revision of estimates taken to goodwill 28.4 (7.5) (5.7)
Revaluation of payments due to vendors (note 5) (1.9) (7.2) (15.8)
Exchange adjustments (5.7) 10.5 (3.2)
At the end of the period 260.9 205.6 193.5
The Group does not consider there to be any material contingent liabilities as at 30 June 2014.
17. Issued share capital - movement in the period
Number of equity ordinary shares (million) Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December2013
At the beginning of the period 1,348.7 1,265.4 1,265.4
Conversion of bond to equity - 66.3 76.5
Exercise of share options 1.1 2.6 6.8
At the end of the period 1,349.8 1,334.3 1,348.7
18. Related party transactions
From time to time the Group enters into transactions with its associate undertakings. These transactions were not material
for any of the periods presented.
Notes to the unaudited condensed consolidated interim financial statements (continued)
19.Non-GAAP measures of performance
Reconciliation of profit before interest and taxation to headline PBIT for the six months ended 30 June 2014:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Profit before interest and taxation 559.8 541.4 1,478.4
Amortisation and impairment of acquired intangible assets 74.0 94.2 179.8
Goodwill impairment - - 23.3
Gains on disposal of investments (17.1) (0.3) (6.0)
Gains on re-measurement of equity interest on acquisition of controlling interest (5.9) - (30.0)
Investment write-downs - - 0.4
Restructuring costs 9.1 - 5.0
Share of exceptional losses of associates 2.1 1.7 10.7
Headline PBIT 622.0 637.0 1,661.6
Finance income 43.0 25.0 64.3
Finance costs (133.4) (138.3) (267.9)
(90.4) (113.3) (203.6)
Interest cover on headline PBIT 6.9 times 5.6 times 8.2 times
Calculation of headline EBITDA:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Headline PBIT (as above) 622.0 637.0 1,661.6
Depreciation of property, plant and equipment 95.8 100.5 202.0
Amortisation of other intangible assets 15.1 16.0 32.7
Headline EBITDA 732.9 753.5 1,896.3
Notes to the unaudited condensed consolidated interim financial statements (continued)
19. Non-GAAP measures of performance (continued)
Net sales margin before and after share of results of associates:
£ million Margin Six months ended 30 June 2014 Margin Six months ended 30 June 2013 Margin Year ended 31 December 2013
Net sales 4,791.7 4,884.3 10,076.1
Headline PBIT 13.0% 622.0 13.0% 637.0 16.5% 1,661.6
Share of results of associates (excluding exceptional gains/losses) 30.8 29.3 78.8
Headline PBIT excluding share of results of associates 12.3% 591.2 12.4% 607.7 15.7% 1,582.8
Reconciliation of profit before taxation to headline PBT and headline earnings for the six months ended 30 June 2014:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Profit before taxation 491.1 427.1 1,295.8
Amortisation and impairment of acquired intangible assets 74.0 94.2 179.8
Goodwill impairment - - 23.3
Gains on disposal of investments (17.1) (0.3) (6.0)
Gains on re-measurement of equity interest on acquisition of controlling interest (5.9) - (30.0)
Investment write-downs - - 0.4
Restructuring costs 9.1 - 5.0
Share of exceptional losses of associates 2.1 1.7 10.7
Revaluation of financial instruments (21.7) 1.0 (21.0)
Headline PBT 531.6 523.7 1,458.0
Headline tax charge (note 7) (106.2) (114.1) (294.3)
Non-controlling interests (31.4) (34.5) (75.6)
Headline earnings 394.0 375.1 1,088.1
Ordinary dividends1 156.8 139.3 397.3
Dividend cover on headline earnings 2.5 times 2.7 times 2.7 times
1 For the six months ended 30 June 2014, ordinary dividends represent an estimate of the 2014 interim dividend expected to
be paid to share owners in November 2014, based on the number of shares in issue at 30 June 2014. The corresponding figure
for the six months ended 30 June 2013 represents the 2013 interim dividend paid in November 2013.
Notes to the unaudited condensed consolidated interim financial statements (continued)
19. Non-GAAP measures of performance (continued)
Reconciliation of free cash flow for the six months ended 30 June 2014:
£ million Six months ended 30 June 2014 Six months ended 30 June 2013 Year ended 31 December 2013
Cash generated by operations 207.4 402.9 1,784.1
Plus:
Interest received 30.4 24.5 51.3
Investment income 4.4 - 10.1
Dividends received from associates 29.4 23.0 56.7
Share option proceeds 6.8 16.7 42.4
Proceeds on disposal of property, plant and equipment 1.1 3.5 7.3
Movements in working capital and provisions 539.6 371.8 133.4
Less:
Interest and similar charges paid (155.2) (145.4) (254.7)
Purchase of property, plant and equipment (80.1) (128.4) (240.7)
Purchase of other intangible assets (including capitalised computer software) (15.3) (22.2) (43.8)
Corporation and overseas tax paid (133.7) (129.8) (273.3)
Dividends paid to non-controlling interests in subsidiary undertakings (21.7) (24.4) (53.2)
Free cash flow 413.1 392.2 1,219.6
Notes to the unaudited condensed consolidated interim financial statements (continued)
20. Going concern and risk management policies
In considering going concern and liquidity risk, the directors have reviewed the Group's future cash requirements and
earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered
the impact of a range of potential changes to trading performance. The directors have concluded that the Group should be
able to operate within its current facilities and comply with its banking covenants for the foreseeable future and
therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis.
At 30 June 2014, the Group has access to £5.0 billion of committed bank facilities with maturity dates spread over the
years 2014 to 2043 as illustrated below:
£ million Maturity by year
2014 2015 2016 2017 2018+
US bond $500m (5.625%'43) 292.4 292.4
US bond $300m (5.125% '42) 175.4 175.4
Eurobonds E750m (3.0%'23) 600.3 600.3
US bond $500m (3.625% '22) 292.4 292.4
US bond $812m (4.75% '21) 475.0 475.0
£ bonds £200m (6.375% '20) 200.0 200.0
£ bonds £400m (6.0% '17) 400.0 400.0
Bank revolver ($1,200m and £475m) 1,176.7 1,176.7
Eurobonds E750m (6.625% '16) 600.3 600.3
Eurobonds E500m (5.25% '15) 400.2 400.2
US bond $600m (8.0% '14) 350.8 350.8
TNS private placements $25m 14.6 14.6
Total committed facilities available 4,978.1 365.4 400.2 1,777.0 400.0 2,035.5
Drawn down facilities at 30 June 2014 4,002.9 365.4 400.2 801.8 400.0 2,035.5
Undrawn committed credit facilities 975.2
Drawn down facilities at 30 June 2014 4,002.9
Net cash at 30 June 2014 (1,024.7)
Other adjustments (21.0)
Net debt at 30 June 2014 2,957.2
Given the strong cash generation of the business, its debt maturity profile and available facilities, the directors believe
the Group has sufficient liquidity to match its requirements for the foreseeable future.
Treasury management
The Group's treasury activities are principally concerned with monitoring of working capital, managing external and
internal funding requirements and monitoring and managing financial market risks, in particular risks from movements in
interest and foreign exchange rates.
The Group's risk management policies relating to foreign currency risk, interest rate risk, liquidity risk, capital risk
and credit risk are presented in the notes to the consolidated financial statements of the 2013 Annual Report and Accounts
and in the opinion of the Board remain relevant for the remaining six months of the year.
Notes to the unaudited condensed consolidated interim financial statements (continued)
21. Financial instruments
The fair values of financial assets and liabilities are based on quoted market prices where available. Where the market
value is not available, the Group has estimated relevant fair values on the basis of publicly available information from
outside sources or on the basis of discounted cash flow models where appropriate.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at
fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
£ million Level 1 Level 2 Level 3 Carrying value
Derivatives in designated hedge relationships
Derivative assets - 39.8 - 39.8
Derivative liabilities - (26.9) - (26.9)
Held for trading
Derivative assets - 0.6 - 0.6
Derivative liabilities - (0.4) - (0.4)
Payments due to vendors (earnout agreements) (note 16) - - (260.9) (260.9)
Liabilities in respect of put options - - (165.4) (165.4)
Available for sale
Other investments 13.5 - 317.7 331.2
30 June 2014 13.5 13.1 (108.6) (82.0)
Reconciliation of level 3 fair value measurements1:
£ million Liabilities in respect of put options Other investments Carryingvalue
1 January 2014 (139.1) 247.6 108.5
Gains recognised in the income statement 0.1 - 0.1
Gains recognised in other comprehensive income - 52.5 52.5
Exchange adjustments 1.4 (7.9) (6.5)
Additions (29.2) 35.8 6.6
Disposals - (10.3) (10.3)
Settlements 1.4 - 1.4
30 June 2014 (165.4) 317.7 152.3
1 Payments due to vendors (earnout agreements) are reconciled in note 16.
Notes to the unaudited condensed consolidated interim financial statements (continued)
21. Financial instruments (continued)
Payments due to vendors and liabilities in respect of put options
Future anticipated payments due to vendors in respect of contingent consideration (earnout agreements) are recorded at fair
value, which is the present value of the expected cash outflows of the obligations. Liabilities in respect of put option
agreements are initially recorded at the present value of the redemption amount and subsequently measured at fair value.
Both types of obligations are dependent on the future financial performance of the entity and it is assumed that future
profits are in line with directors' estimates. The directors derive their estimates from internal business plans together
with financial due diligence performed in connection with the acquisition. At 30 June 2014, the weighted average growth
rate in estimating future financial performance was 18.7%, which reflects the prevalence of recent acquisitions in the
faster growing markets and new media sectors.
A one percentage point increase or decrease in the growth rate in estimated future financial performance would increase or
decrease the combined liabilities due to earnout agreements and put options by approximately £9.3 million and £13.6
million, respectively. An increase in the liability would result in a reduction in the revaluation of financial
instruments (note 5), while a decrease would result in a further gain.
Other investments
Other investments included in level 1 are based on quoted market prices. Other investments included in level 3 are unlisted
securities, where market value is not readily available. The Group has estimated relevant fair values on the basis of
publicly available information from outside sources or on the basis of discounted cash flow models where appropriate. The
sensitivity to changes in unobservable inputs is specific to each individual investment.
22. Principal risks and uncertainties
The directors have considered the principal risks and uncertainties affecting the Group for the second half of 2014 and
determined that these are unchanged from those presented in the Group's published Annual Report and Accounts and Form 20-F
for the year ended 31 December 2013. The Annual Report and Accounts and Form 20-F are published in the Investor Relations
section of the Group website (www.wpp.com) and are available from the Group on request.
WPP plc has specific policies in place to ensure that risks are properly evaluated and managed at the appropriate level
within the business. These are presented on pages 182 to 185 of the published 2013 Annual Report and Accounts. Pages 5 and
6 of the Group's Form 20-F for the year ended 31 December 2013 contain a detailed explanation of the risk factors
identified by the Group and these are summarised below:
Clients
n The Group competes for clients in a highly competitive industry and client loss may have a material adverse effect on the
Group's market share and its business, revenues, results of operations, financial condition or prospects.
Notes to the unaudited condensed consolidated interim financial statements (continued)
22. Principal risks and uncertainties (continued)
n The Group receives a significant portion of its revenues from a limited number of large clients and the loss of these
clients could have a material adverse effect on the Group's prospects, business, financial condition and results of
operations.
Data Security
n The Group is subject to strict data protection and privacy legislation in the jurisdictions in which it operates and
relies extensively on information technology systems. The Group operates on a largely decentralised basis with a large
number of different agencies and operating entities and the resulting size and diversity of the operational systems
increases the vulnerability of such systems to breakdown or malicious intrusion.
Economic
n The Group's businesses are subject to recessionary economic cycles. Many of the economies in which the Group operates
currently have significant economic challenges.
Financial
n Currency exchange rate fluctuations could adversely impact the Group's consolidated results.
n The interest rates and fees payable by the Group in respect of certain of its borrowings are, in part, influenced by the
credit ratings issued by the international debt rating agencies.
n The Group is subject to credit risk through the default of a client or other counterparty.
Mergers & Acquisitions
n The Group may be unsuccessful in evaluating material risks involved in completed and future acquisitions and may be
unsuccessful in integrating any acquired operations with its existing businesses.
n Goodwill and other intangible assets recorded on the Group's balance sheet with respect to acquired companies may become
impaired.
Operational
n The Group operates in 110 countries and is exposed to the risks of doing business internationally.
People
n The Group's performance could be adversely affected if it were unable to attract and retain key talent or had inadequate
talent management and succession planning for key management roles.
Regulatory/Legal
n The Group may be subject to regulations restricting its activities or effecting changes in taxation.
n The Group may be exposed to liabilities from allegations that certain of its clients' advertising claims may be false or
misleading or that its clients' products may be defective or harmful.
n The Group is subject to strict anti-corruption and anti-bribery legislation and enforcement in the countries in which it
operates.
n Civil liabilities or judgements against the Company or its directors or officers based on United States federal or state
securities laws may not be enforceable in the United States or in England and Wales or in Jersey.
Responsibility statement
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting';
b) the interim management report and note 22 includes a fair review of the information required by DTR
4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for
the remaining six months of the year); and
c) the interim management report and note 18 includes a fair review of the information required by DTR
4.2.8R (disclosure of related party transactions and changes therein).
Signed on behalf of the Board on 26 August 2014.
P W G Richardson
Group finance director
Independent review report to WPP plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report
for the six months ended 30 June 2014 which comprises the condensed consolidated interim income statement, statement of
comprehensive income, cash flow statement, balance sheet, statement of changes in equityand related notes 1 to 21. We have
read the other information contained in the half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland)
2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state
to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union and issued by the International Accounting Standards Board.
The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
26 August 2014
Appendix 2: Interim results for the six months ended 30 June 2014 in
reportable US Dollars1
Unaudited illustrative condensed consolidated interim income statement for the six months ended 30 June 2014
$ million Six months ended 30 June 2014 Six months ended 30 June 2013 +/(-)% Year ended 31 December 2013
Billings 36,850.9 35,037.4 5.2 72,344.5
Revenue 9,135.0 8,210.8 11.3 17,251.5
Direct costs (1,132.2) (681.7) (66.1) (1,477.0)
Net sales 8,002.8 7,529.1 6.3 15,774.5
Operating costs (7,111.7) (6,742.4) (5.5) (13,547.9)
Operating profit 891.1 786.7 13.3 2,226.6
Share of results of associates 48.0 42.6 12.7 107.8
Profit before interest and taxation 939.1 829.3 13.2 2,334.4
Finance income 71.7 38.6 85.8 101.2
Finance costs (222.3) (213.3) (4.2) (418.7)
Revaluation of financial instruments 36.8 (1.6) - 34.4
Profit before taxation 825.3 653.0 26.4 2,051.3
Taxation (159.2) (172.3) 7.6 (448.1)
Profit for the period 666.1 480.7 38.6 1,603.2
Attributable to:
Equity holders of the parent 613.7 427.6 43.5 1,485.1
Non-controlling interests 52.4 53.1 1.3 118.1
666.1 480.7 38.6 1,603.2
Headline PBIT 1,042.8 976.8 6.8 2,620.1
Net sales margin 13.0% 13.0% 16.6%
Headline PBT 892.2 802.1 11.2 2,302.6
Reported earnings per share2
Basic earnings per ordinary share 46.5¢ 33.9¢ 37.2 114.8¢
Diluted earnings per ordinary share 45.5¢ 32.7¢ 39.1 110.4¢
Headline earnings per share2
Basic earnings per ordinary share 50.2¢ 45.5¢ 10.3 132.9¢
Diluted earnings per ordinary share 49.0¢ 43.5¢ 12.6 127.6¢
1 The unaudited consolidated income statement above is presented in reportable US Dollars for information purposes only and
has been prepared assuming the US Dollar is the reporting currency of the Group, whereby local currency results are
translated into US Dollars at actual monthly average exchange rates in the periods presented. Among other currencies, this
includes an average exchange rate of US$1.6689 to the pound for the period ended 30 June 2014 (period ended 30 June 2013:
US$1.5441; year ended 31 December 2013: US$1.5646).
2 The basis of the calculations of the Group's earnings per share and headline earnings per share are set out in note 9 of
Appendix 1.
Appendix 3: Interim results for the six months ended 30 June 2014 in
reportable Euros1
Unaudited illustrative condensed consolidated interim income statement for the six months ended 30 June 2014
E million Six months ended 30 June 2014 Six months ended 30 June 2013 +/(-)% Year ended 31 December 2013
Billings 26,871.7 26,699.8 0.6 54,431.2
Revenue 6,663.1 6,254.9 6.5 12,978.1
Direct costs (825.9) (519.5) (59.0) (1,111.0)
Net sales 5,837.2 5,735.4 1.8 11,867.1
Operating costs (5,187.6) (5,133.7) (1.0) (10,201.5)
Operating profit 649.6 601.7 8.0 1,665.6
Share of results of associates 35.1 32.4 8.3 80.5
Profit before interest and taxation 684.7 634.1 8.0 1,746.1
Finance income 52.4 29.2 79.5 75.8
Finance costs (162.1) (162.3) 0.1 (315.4)
Revaluation of financial instruments 27.0 (1.1) - 25.1
Profit before taxation 602.0 499.9 20.4 1,531.6
Taxation (116.5) (131.2) 11.2 (335.1)
Profit for the period 485.5 368.7 31.7 1,196.5
Attributable to:
Equity holders of the parent 447.2 328.2 36.3 1,107.6
Non-controlling interests 38.3 40.5 5.4 88.9
485.5 368.7 31.7 1,196.5
Headline PBIT 760.1 746.5 1.8 1,961.6
Net sales margin 13.0% 13.0% 16.5%
Headline PBT 650.4 613.4 6.0 1,722.0
Reported earnings per share2
Basic earnings per ordinary share 33.9¢ 26.0¢ 30.4 85.6¢
Diluted earnings per ordinary share 33.1¢ 25.1¢ 31.9 82.3¢
Headline earnings per share2
Basic earnings per ordinary share 36.5¢ 34.8¢ 4.9 99.4¢
Diluted earnings per ordinary share 35.7¢ 33.3¢ 7.2 95.4¢
1 The unaudited consolidated income statement above is presented in reportable Euros for information purposes only and has
been prepared assuming the Euro is the reporting currency of the Group, whereby local currency results are translated into
Euros at actual monthly average exchange rates in the periods presented. Among other currencies, this includes an average
exchange rate of E1.2176 to the pound for the period ended 30 June 2014 (period ended 30 June 2013: E1.1753; year ended 31
December 2013: E1.1776).
2 The basis of the calculations of the Group's earnings per share and headline earnings per share are set out in note 9 of
Appendix 1.
Glossary and basis of preparation
Average net debt
Average net debt is calculated as the average daily net borrowings of the Group. Net debt at a period end is calculated as
the sum of the net borrowings of the Group, derived from the cash ledgers and accounts in the balance sheet.
Billings and estimated net new billings
Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the
total of other fees earned. Net new billings represent the estimated annualised impact on billings of new business gained
from both existing and new clients, net of existing client business lost. The estimated impact is based upon initial
assessments of the clients' marketing budgets, which may not necessarily result in actual billings of the same amount.
Constant currency
The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted
2014 exchange rates to local currency reported results for the current and prior year. This gives a US dollar - denominated
income statement which excludes any variances attributable to foreign exchange rate movements.
Free cash flow
Free cash flow is calculated as headline operating profit before non cash charges for share-based incentive plans,
depreciation of property, plant and equipment and amortisation of other intangible assets, including dividends received
from associates, interest received, investment income received, proceeds from the issue of shares, and proceeds from the
disposal of property, plant and equipment, less corporation and overseas tax paid, interest and similar charges paid,
dividends paid to non-controlling interests in subsidiary undertakings, purchases of property, plant and equipment and
purchases of other intangible assets.
Net sales/ net sales margin
Net sales are revenue less direct costs. Net sales margin is calculated as headline PBIT (defined below) as a percentage of
net sales. The Group has previously used the terms gross margin and gross profit to refer to net sales.
Headline earnings
Headline PBT less taxation (excluding net deferred tax credit in relation to the amortisation of acquired intangible assets
and other goodwill items) and non-controlling interests.
Headline operating profit/Headline PBIT
Profit before finance income/costs and revaluation of financial instruments, taxation, investment gains/losses and
write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets,
Group restructuring costs, share of exceptional gains/losses of associates and gains/losses on remeasurement of equity
interest on acquisition of controlling interest.
Headline PBT
Profit before taxation, investment gains/losses and write-downs, goodwill impairment and other goodwill write-downs,
amortisation and impairment of acquired intangible assets, Group restructuring costs, share of exceptional gains/losses of
associates, gains/losses arising from the revaluation of financial instruments, and gains/losses on remeasurement of equity
interest on acquisition of controlling interest.
Operating margin
Headline operating profit as a percentage of net sales.
Pro forma ('like-for-like')
Pro forma comparisons are calculated as follows: current year, constant currency actual results (which include acquisitions
from the relevant date of completion) are compared with prior year, constant currency actual results, adjusted to include
the results of acquisitions for the commensurate period in the prior year. The Group uses the terms 'pro forma' and
'like-for-like' interchangeably.
This information is provided by RNS
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