REG - WPP PLC - 2016 Interim Results <Origin Href="QuoteRef">WPP.L</Origin> - Part 3
24/08/2016 07:07
- Part 3: For the preceding part double click ID:nRSX9650Hb
Current year 154.8 113.7 403.0
Prior years (22.2) 9.2 (108.4)
132.6 122.9 294.6
Deferred tax
Current year 2.4 (11.0) (35.8)
Prior years 8.1 (3.3) (11.3)
10.5 (14.3) (47.1)
Tax charge 143.1 108.6 247.5
The calculation of the headline tax rate is as follows:
£ million Six months ended 30 June 2016 Six months ended30 June2015 Year ended 31 December 2015
Headline PBT1 689.7 595.7 1,622.3
Tax charge 143.1 108.6 247.5
Tax credit relating to restructuring costs 0.5 4.7 26.5
Tax charge relating to gains on disposal of investments and subsidiaries (7.7) (0.8) (1.1)
Deferred tax impact of the amortisation of acquired intangible assets and other goodwill items 8.9 6.6 35.4
Headline tax charge 144.8 119.1 308.3
Headline tax rate 21.0% 20.0% 19.0%
8. Ordinary dividends
The Board has recommended an interim dividend of 19.55p (2015: 15.91p) per ordinary share. This is expected to be paid on 7
November 2016 to share owners on the register at 7 October 2016. The Board recommended a final dividend of 28.78p per
ordinary share in respect of 2015. This was paid on 4 July 2016.
1 Headline PBT is defined in note 19.
Notes to the unaudited condensed consolidated interim financial statements (continued)
9. Earnings per share
Basic EPS
The calculation of basic reported and headline EPS is as follows:
Six months ended 30 June 2016 Six months ended 30 June 2015 +/(-)% ConstantCurrency+/(-)% Year ended 31 December 2015
Reported earnings1 (£ million) 245.8 566.2 1,160.2
Headline earnings (£ million) (note 19) 508.7 441.7 1,229.1
Average shares used in basic EPS calculation (million) 1,284.0 1,294.6 1,288.5
Reported EPS 19.1p 43.7p (56.3) (62.2) 90.0p
Headline EPS 39.6p 34.1p 16.1 11.0 95.4p
Diluted EPS
The calculation of diluted reported and headline EPS is as follows:
Six months ended 30 June 2016 Six months ended 30 June 2015 +/(-)% ConstantCurrency+/(-)% Year ended 31 December 2015
Diluted reported earnings (£ million) 245.8 566.2 1,160.2
Diluted headline earnings (£ million) 508.7 441.7 1,229.1
Shares used in diluted EPS calculation (million) 1,300.0 1,317.1 1,313.0
Diluted reported EPS 18.9p 43.0p (56.0) (62.0) 88.4p
Diluted headline EPS 39.1p 33.5p 16.7 11.5 93.6p
A reconciliation between the shares used in calculating basic and diluted EPS is as follows:
million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Average shares used in basic EPS calculation 1,284.0 1,294.6 1,288.5
Dilutive share options outstanding 2.2 3.2 3.5
Other potentially issuable shares 13.8 19.3 21.0
Shares used in diluted EPS calculation 1,300.0 1,317.1 1,313.0
At 30 June 2016 there were 1,330,032,727 ordinary shares in issue.
1 Reported earnings is equivalent to profit for the period attributable to equity holders of the parent.
Notes to the unaudited condensed consolidated interim financial statements (continued)
10. Analysis of cash flows
The following tables analyse the items included within the main cash flow headings on page 22:
Net cash inflow/(outflow) from operating activities:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Profit for the period 282.0 601.1 1,245.1
Taxation 143.1 108.6 247.5
Revaluation of financial instruments 65.4 21.8 34.7
Finance costs 122.1 111.5 224.1
Finance income (43.1) (38.1) (72.4)
Share of results of associates (15.9) (16.0) (47.0)
Operating profit 553.6 788.9 1,632.0
Adjustments for:
Non-cash share-based incentive plans (including share options) 52.0 48.5 99.0
Depreciation of property, plant and equipment 102.6 97.5 194.7
Goodwill impairment - - 15.1
Amortisation and impairment of acquired intangible assets 77.6 66.7 140.1
Amortisation of other intangible assets 17.9 15.4 33.7
Investment write-downs 83.3 - 78.7
Gains on disposal of investments and subsidiaries (19.5) (91.9) (131.0)
Losses/(gains) on remeasurement of equity interest on acquisition of controlling interest 38.9 (140.2) (165.0)
Losses/(gains) on sale of property, plant and equipment 0.2 (0.1) 1.1
Operating cash flow before movements in working capital and provisions 906.6 784.8 1,898.4
Movements in working capital and provisions1 (555.8) (772.2) (164.1)
Cash generated by operations 350.8 12.6 1,734.3
Corporation and overseas tax paid (249.5) (165.0) (301.2)
Interest and similar charges paid (116.7) (110.0) (212.0)
Interest received 35.3 28.6 61.3
Investment income 9.6 3.0 4.9
Dividends received from associates 36.7 50.1 72.6
66.2 (180.7) 1,359.9
Acquisitions and disposals:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Initial cash consideration (108.3) (307.8) (463.5)
Cash and cash equivalents acquired (net) 37.9 19.2 57.7
Earnout payments (20.5) (10.9) (43.9)
Purchase of other investments (including associates) (121.9) (201.7) (283.2)
Proceeds on disposal of investments and subsidiaries 30.0 41.9 63.4
Acquisitions and disposals (182.8) (459.3) (669.5)
Cash consideration for non-controlling interests (43.4) (7.9) (23.6)
Net acquisition payments and investments (226.2) (467.2) (693.1)
1 The Group typically experiences an outflow of working capital in the first half of the financial year and an inflow in
the second half. This is primarily due to the seasonal nature of working capital flows associated with its media buying
activities on behalf of 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 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Purchase of own shares by ESOP Trusts (48.3) (59.7) (181.6)
Shares purchased into treasury (148.5) (345.7) (406.0)
(196.8) (405.4) (587.6)
Net (decrease)/increase in borrowings:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Increase in drawings on bank loans 329.2 197.7 128.9
Repayment of E498 million bonds (392.1) - -
Proceeds from issues of E600 million bonds - 439.0 858.7
Repayment of E500 million bonds - (481.9) (481.9)
Premium on exchange of E252 million bonds - (13.7) (13.7)
(62.9) 141.1 492.0
Cash and cash equivalents:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Cash at bank and in hand 1,985.7 1,206.9 2,227.8
Short-term bank deposits 161.7 146.1 154.6
Overdrafts1 (546.3) (165.7) (435.8)
1,601.1 1,187.3 1,946.6
11. Net debt
£ million 30 June 2016 30 June 2015 31 December 2015
Cash and short-term deposits 2,147.4 1,353.0 2,382.4
Bank overdrafts and loans due within one year (1,057.2) (518.7) (932.0)
Bonds and bank loans due after one year (5,339.1) (4,217.0) (4,661.2)
(4,248.9) (3,382.7) (3,210.8)
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 £5,633.0 million at 30 June 2016
(30 June 2015: £4,611.9 million; 31 December 2015: £5,207.4 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 2016 30 June 2015 31 December 2015
Within one year (678.4) (528.7) (541.7)
Between one and two years (365.2) (550.0) (548.2)
Between two and three years (361.9) (308.4) (325.4)
Between three and four years (652.8) (129.2) (581.6)
Between four and five years (343.0) (129.2) (335.0)
Over five years (5,258.1) (4,682.5) (4,459.5)
Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes (7,659.4) (6,328.0) (6,791.4)
Short-term overdrafts - within one year (546.3) (165.7) (435.8)
Future anticipated cash flows (8,205.7) (6,493.7) (7,227.2)
Effect of discounting/financing rates 1,809.4 1,758.0 1,634.0
Debt financing (6,396.3) (4,735.7) (5,593.2)
Cash and short-term deposits 2,147.4 1,353.0 2,382.4
Net debt (4,248.9) (3,382.7) (3,210.8)
12. Goodwill and acquisitions
Goodwill in relation to subsidiary undertakings increased by £1,622.9 million (30 June 2015: £77.9 million) in the period.
This movement primarily relates to the effect of currency translation and also includes both goodwill arising on
acquisitions completed in the period and adjustments to goodwill relating to acquisitions completed in prior years.
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 2016 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 2016 30 June 2015 31 December 2015
Brands with an indefinite useful life 1,083.4 937.4 968.1
Acquired intangibles 846.8 674.3 667.6
Other (including capitalised computer software) 106.5 102.5 79.7
2,036.7 1,714.2 1,715.4
14. Trade and other receivables
Amounts falling due within one year:
£ million 30 June 2016 30 June 2015 31 December 2015
Trade receivables 7,340.2 6,109.2 6,799.4
VAT and sales taxes recoverable 146.5 122.3 154.9
Prepayments 363.3 369.5 235.0
Accrued income 3,412.8 2,805.2 2,853.8
Fair value of derivatives 15.2 1.2 4.6
Other debtors 473.1 577.6 447.7
11,751.1 9,985.0 10,495.4
Amounts falling due after more than one year:
£ million 30 June2016 30 June 2015 31 December 2015
Prepayments 3.5 1.7 1.5
Accrued income 14.5 11.8 5.8
Other debtors 172.1 98.6 131.7
Fair value of derivatives 64.8 29.8 39.7
254.9 141.9 178.7
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 June2016 30 June 2015 31 December 2015
Trade payables 9,379.8 7,764.4 8,538.3
Deferred income 1,216.4 1,017.4 1,081.0
Payments due to vendors (earnout agreements) 234.6 102.8 126.0
Liabilities in respect of put option agreements with vendors 49.5 43.0 51.1
Fair value of derivatives 6.4 0.8 0.7
Share purchases - close period commitments 119.6 - -
Other creditors and accruals 2,861.9 2,431.4 2,887.9
13,868.2 11,359.8 12,685.0
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 June2016 30 June 2015 31 December 2015
Payments due to vendors (earnout agreements) 651.7 321.8 455.3
Liabilities in respect of put option agreements with vendors 223.3 163.8 183.3
Fair value of derivatives 1.3 3.2 2.3
Other creditors and accruals 245.7 218.7 250.6
1,122.0 707.5 891.5
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 June2016 30 June 2015 31 December2015
Within one year 234.6 102.8 126.0
Between 1 and 2 years 153.1 87.3 104.9
Between 2 and 3 years 168.7 68.8 105.1
Between 3 and 4 years 174.3 63.6 110.9
Between 4 and 5 years 121.1 67.7 122.5
Over 5 years 34.5 34.4 11.9
886.3 424.6 581.3
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 2016 Six months ended 30 June 2015 Year ended 31 December2015
At the beginning of the period 581.3 311.4 311.4
Earnouts paid (20.5) (10.9) (43.9)
New acquisitions 185.3 92.7 262.2
Revision of estimates taken to goodwill 38.9 19.5 19.9
Revaluation of payments due to vendors (note 5) 38.0 26.0 35.6
Exchange adjustments 63.3 (14.1) (3.9)
At the end of the period 886.3 424.6 581.3
The Group does not consider there to be any material contingent liabilities as at 30 June 2016.
17. Issued share capital - movement in the period
Number of equity ordinary shares (million) Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December2015
At the beginning of the period 1,329.4 1,325.7 1,325.7
Exercise of share options 0.6 0.9 3.7
At the end of the period 1,330.0 1,326.6 1,329.4
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
The non-GAAP measures of performance shown below have been included to provide the users of the financial statements with a
better understanding of the key performance indicators of the business.
Reconciliation of profit before interest and taxation to headline PBIT for the six months ended 30 June 2016:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Profit before interest and taxation 569.5 804.9 1,679.0
Amortisation and impairment of acquired intangible assets 77.6 66.7 140.1
Goodwill impairment - - 15.1
Gains on disposal of investments and subsidiaries (19.5) (91.9) (131.0)
Losses/(gains) on remeasurement of equity interest on acquisition of controlling interest 38.9 (140.2) (165.0)
Investment write-downs 83.3 - 78.7
Restructuring costs 10.5 21.2 106.2
IT asset write downs - - 29.1
Share of exceptional losses of associates 8.4 8.4 21.8
Headline PBIT 768.7 669.1 1,774.0
Finance income 43.1 38.1 72.4
Finance costs (122.1) (111.5) (224.1)
(79.0) (73.4) (151.7)
Interest cover on headline PBIT 9.7 times 9.1 times 11.7 times
Calculation of headline EBITDA:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Headline PBIT (as above) 768.7 669.1 1,774.0
Depreciation of property, plant and equipment 102.6 97.5 194.7
Amortisation of other intangible assets 17.9 15.4 33.7
Headline EBITDA 889.2 782.0 2,002.4
Net sales margin before and after share of results of associates:
£ million Margin Six months ended 30 June 2016 Margin Six months ended 30 June 2015 Margin Year ended 31 December 2015
Net sales 5,593.8 5,040.7 10,524.3
Headline PBIT 13.7% 768.7 13.3% 669.1 16.9% 1,774.0
Share of results of associates (excluding exceptional gains/losses) 24.3 24.4 68.8
Headline PBIT excluding share of results of associates 13.3% 744.4 12.8% 644.7 16.2% 1,705.2
Notes to the unaudited condensed consolidated interim financial statements (continued)
19. Non-GAAP measures of performance (continued)
Reconciliation of profit before taxation to headline PBT and headline earnings for the six months ended 30 June 2016:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Profit before taxation 425.1 709.7 1,492.6
Amortisation and impairment of acquired intangible assets 77.6 66.7 140.1
Goodwill impairment - - 15.1
Gains on disposal of investments and subsidiaries (19.5) (91.9) (131.0)
Losses/(gains) on remeasurement of equity interest on acquisition of controlling interest 38.9 (140.2) (165.0)
Investment write-downs 83.3 - 78.7
Restructuring costs 10.5 21.2 106.2
IT asset write-downs - - 29.1
Share of exceptional losses of associates 8.4 8.4 21.8
Revaluation of financial instruments 65.4 21.8 34.7
Headline PBT 689.7 595.7 1,622.3
Headline tax charge (note 7) (144.8) (119.1) (308.3)
Non-controlling interests (36.2) (34.9) (84.9)
Headline earnings 508.7 441.7 1,229.1
Ordinary dividends1 260.0 202.6 545.8
Dividend cover on headline earnings 2.0 times 2.2 times 2.3 times
Reconciliation of free cash flow for the six months ended 30 June 2016:
£ million Six months ended 30 June 2016 Six months ended 30 June 2015 Year ended 31 December 2015
Cash generated by operations 350.8 12.6 1,734.3
Plus:
Interest received 35.3 28.6 61.3
Investment income 9.6 3.0 4.9
Dividends received from associates 36.7 50.1 72.6
Share option proceeds 5.3 5.4 27.6
Proceeds on disposal of property, plant and equipment 9.7 11.2 13.4
Movements in working capital and provisions 555.8 772.2 164.1
Less:
Interest and similar charges paid (116.7) (110.0) (212.0)
Purchase of property, plant and equipment (126.7) (73.1) (210.3)
Purchase of other intangible assets (including capitalised computer software) (15.9) (17.0) (36.1)
Corporation and overseas tax paid (249.5) (165.0) (301.2)
Dividends paid to non-controlling interests in subsidiary undertakings (35.0) (25.7) (55.2)
Free cash flow 459.4 492.3 1,263.4
1 For the six months ended 30 June 2016, ordinary dividends represent an estimate of the 2016 interim dividend expected to
be paid to share owners in November 2016, based on the number of shares in issue at 30 June 2016. The corresponding figure
for the six months ended 30 June 2015 represents the 2015 interim dividend paid in November 2015.
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 2016, the Group has access to £7.4 billion of committed facilities with maturity dates spread over the years
2017 to 2043 as illustrated below:
£ million Maturity by year
2017 2018 2019 2020 2021+
US bond $500m (5.625% '43) 376.8 376.8
US bond $300m (5.125% '42) 226.1 226.1
Eurobonds E600m (1.625% '30) 500.8 500.8
Eurobonds E750m (2.25% '26) 625.9 625.9
US bond $750m (3.75% '24) 565.3 565.3
Eurobonds E750m (3.0% '23) 625.9 625.9
US bond $500m (3.625% '22) 376.8 376.8
US bond $812m (4.75% '21) 612.3 612.3
Bank revolver ($2,500m) 1,884.2 1,884.2
£ bonds £200m (6.375% '20) 200.0 200.0
Eurobonds E600m (0.75% '19) 500.8 500.8
Bank revolver (A$520m) 291.8 291.8
Eurobonds E252m (0.43% '18) 210.2 210.2
£ bonds £400m (6.0% '17) 400.0 400.0
Total committed facilities available 7,396.9 400.0 210.2 792.6 200.0 5,794.1
Drawn down facilities at 30 June 2016 5,766.7 400.0 210.2 708.4 200.0 4,248.1
Undrawn committed credit facilities 1,630.2
Drawn down facilities at 30 June 2016 5,766.7
Net cash at 30 June 2016 (1,601.1)
Other adjustments 83.3
Net debt at 30 June 2016 4,248.9
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 2015 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
30 June 2016
Derivatives in designated hedge relationships
Derivative assets - 69.5 -
Derivative liabilities - (0.4) -
Held for trading
Derivative assets - 10.5 -
Derivative liabilities - (7.3) -
Share purchases - close period commitments (119.6) - -
Payments due to vendors (earnout agreements) (note 16) - - (886.3)
Liabilities in respect of put options - - (272.8)
Available for sale
Other investments 310.8 - 992.9
Reconciliation of level 3 fair value measurements1:
£ million Liabilities in respect of put options Other investments
1 January 2016 (234.4) 847.3
Losses recognised in the income statement (23.5) -
Gains recognised in other comprehensive income - 17.1
Exchange adjustments (37.0) 94.7
Additions (14.6) 37.2
Disposals - (3.4)
Settlements 36.7 -
30 June 2016 (272.8) 992.9
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 in accordance with IAS 32 and subsequently
measured at fair value in accordance with IAS 39. 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 2016, the weighted average growth rate in estimating future financial performance was 23.3%, which
reflects the prevalence of recent acquisitions in the faster growing markets and new media sectors. The risk adjusted
discount rate applied to these obligations at 30 June 2016 was 1.1%.
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 £14.2 million and £20.8
million, respectively. A 0.5 percentage point increase or decrease in the risk adjusted discount rate would decrease or
increase the combined liabilities by approximately £15.1 million and £15.5 million, respectively. An increase in the
liability would result in a loss in the revaluation of financial instruments (note 5), while a decrease would result in a
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.
Notes to the unaudited condensed consolidated interim financial statements (continued)
22. Principal risks and uncertainties
The Board has carried out a robust assessment of the principal risks and uncertainties affecting 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.
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 Existing and proposed data protection laws may restrict the Group's activities and increase our costs.
n The Group is carrying out an IT transformation project and will rely on third parties for the performance of a
significant part of its information technology and operational functions. A failure to provide these functions could have
an adverse effect on the Group's business.
n The Group stores, transmits and relies on critical and sensitive data. Security of this type of data is exposed to
escalating external threats that are increasing in sophistication as well as internal breaches.
Operational
n The Group's performance could be adversely impacted if it failed to ensure adequate internal control procedures are in
place in relation to the Group's increased proprietary trading.
People and Succession
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 at the parent and operating companies.
Regulatory, Sanctions, Anti-Trust and Taxation
n The Group may be subject to regulations restricting its activities or effecting changes in taxation.
n The Group is subject to anti-corruption, anti-bribery and anti-trust 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.
n The Group is subject to the laws of the United States, EU and other jurisdictions regulating and imposing sanctions on
the supply of services to certain countries. Failure to comply with these laws could expose the Group to civil and criminal
penalties.
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 24 August 2016.
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 2016 which comprises the condensed consolidated interim income statement, statement of
comprehensive income, cash flow statement, balance sheet, statement of changes in equity and 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 and issued by
the International Accounting Standards Board.
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 2016 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
24 August 2016
Appendix 2: Interim results for the six months ended 30 June 2016 in
reportable US Dollars1
Unaudited illustrative condensed consolidated interim income statement for the six months ended 30 June 2016
$ million Six months ended 30 June 2016 Six months ended 30 June 2015 +/(-)% Year ended 31 December 2015
Billings 36,289.8 35,315.4 2.8 72,766.7
Revenue 9,366.7 8,900.8 5.2 18,693.2
Direct costs (1,351.1) (1,217.8) (10.9) (2,614.3)
Net sales 8,015.6 7,683.0 4.3 16,078.9
Operating costs (7,222.6) (6,476.0) (11.5) (13,585.1)
Operating profit 793.0 1,207.0 (34.3) 2,493.8
Share of results of associates 22.7 24.3 (6.6) 71.2
Profit before interest and taxation 815.7 1,231.3 (33.8) 2,565.0
Finance income 62.2 57.2 8.7 110.9
Finance costs (175.5) (168.8) (4.0) (342.6)
Revaluation of financial instruments (92.9) (34.0) - (53.2)
Profit before taxation 609.5 1,085.7 (43.9) 2,280.1
Taxation (204.5) (166.3) (23.0) (378.4)
Profit for the period 405.0 919.4 (55.9) 1,901.7
Attributable to:
Equity holders of the parent 353.1 866.0 (59.2) 1,771.6
Non-controlling interests 51.9 53.4 2.8 130.1
405.0 919.4 (55.9) 1,901.7
Headline PBIT 1,100.2 1,021.5 7.7 2,704.3
Net sales margin 13.7% 13.3% 0.42 16.8%
Headline PBT 986.9 909.9 8.5 2,472.6
Reported earnings per share3
Basic earnings per ordinary share 27.5¢
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