Notes 6-10

10. Sources of finance

The following table summarises the equity and debt financing of the Group, and changes during the year:

  Shares Debt

2008
£m
2007
£m
2008
£m
2007
£m
Analysis of changes in financing
Beginning of year 223.1 199.0 2,348.0 1,771.5
Shares issued in respect of acquisitions (note 28) 267.7 2.3
Other issues of share capital 8.5 30.2
Reclassification due to changes in
corporate structure1
(362.5)
Share cancellations (1.9) (5.7)
Share issue costs paid (0.8) (2.7)
Net increase in drawings on bank loans,
corporate bonds and convertible bonds
810.4 498.9
Debt acquired 577.8 7.5
Net amortisation of financing
costs included in net debt
(0.6) 5.5
Other movements 81.1 (44.2)
Exchange adjustments 569.0 108.8
End of year 134.1 223.1 4,385.7 2,348.0

Notes

1
Further details on the changes to corporate structure are given in note 26.
The above table excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement.
Shares

At 31 December 2008, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £134.1 million (2007: £223.1 million, 2006: £199.0 million), further details of which are disclosed in notes 26 and 27.

Debt

US$ bonds The Group has in issue $650 million of 5.875% bonds due June 2014. With the acquisition of Taylor Nelson Sofres plc (TNS) in October 2008 the Group took on $103 million of 6.34% Senior Notes, $62 million of 6.46% Senior Notes, $10 million of floating rate Senior Notes and $20 million of floating rate Guaranteed Senior Notes, which were all repaid in January 2009. With the acquisition of TNS, the Group also took on $30 million of 6.22% Senior Notes due July 2012 and $25 million of 6.34% Senior Notes due July 2014. During the year, the Group repaid $100 million of 6.875% bonds on their due date of July 2008.

Eurobonds In May 2008, the Group issued €750 million of 6.625% bonds due May 2016. The Group has in issue €600 million of 4.375% bonds due December 2013 and €500 million of 5.25% bonds due January 2015. With the acquisition of TNS in October 2008 the Group took on €20 million of floating rate Senior Notes, which were repaid in January 2009. During the year, the Group repaid €650 million of 6.0% bonds on their due date of June 2008.

Sterling bonds The Group has in issue £400 million of 6% bonds due April 2017 and £200 million of 6.375% bonds due November 2020. With the acquisition of TNS in October 2008 the Group took on £25 million of 6.51% Senior Notes, which were repaid in January 2009.

Revolving Credit Facilities The Group has a $1.6 billion seven year Revolving Credit Facility due August 2012. During the year, £1,250 million was raised from the Group’s bankers to assist in the acquisition of TNS. This amount is made up of a £650 million term facility with a final maturity date of July 2010 and a £600 million amortising Revolving Credit Facility maturing in July 2011. The Group’s borrowing under these facilities, which are drawn down predominantly in US dollars, euros, Canadian dollars and pounds sterling, averaged $774 million in 2008. The Group had available undrawn committed credit facilities of £1,074 million at December 2008 (2007: £759 million).

Borrowings under the Revolving Credit Facilities are governed by certain financial covenants based on the results and financial position of the Group.

US Commercial Paper Program

The Group has a $1.4 billion US Commercial Paper Program using the $1.6 billion Revolving Credit Facility as a backstop. The Group’s borrowings under this program are notes issued in US dollars and swapped into other currencies as required. The average commercial paper outstanding during the year was $10 million. There was no US Commercial Paper outstanding at 31 December 2008.

Convertible bonds

In March 2005, with the purchase of Grey Global Group Inc, the Group acquired $150 million of 5% convertible debentures due 2033. Each debenture holder had the right to require Grey and WPP (as co-obligor) to repurchase on each of 28 October 2008, 2010 and 2013 all or a portion of the holder’s then outstanding debentures at par ($1,000 per debenture) plus the amount of accrued and unpaid interest. This right was exercised during the year and the debentures were subsequently repurchased.

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 fair value and carrying value:


 
2008
£m
2007
£m
Within one year (569.7) (719.4)
Between one and two years (1,073.9) (94.6)
Between two and three years (369.1) (94.6)
Between three and four years (216.6) (94.6)
Between four and five years (735.4) (94.6)
Over five years (2,567.5) (2,030.1)
Debt financing under the Revolving Credit Facility
and in relation to unsecured loan notes
(5,532.2) (3,127.9)
Short-term overdrafts – within one year (1,254.4) (977.9)
  (6,786.6) (4,105.8)
Effect of discount/financing rates 1,146.5 779.9
Debt financing (5,640.1) (3,325.9)
Cash and short-term deposits 2,572.5 2,040.2
Net debt (3,067.6) (1,285.7)

Analysis of fixed and floating rate debt by currency including the effect of interest rate and cross-currency swaps:

2008
Currency

£m
Fixed
rate1
Floating
basis
Period
(months)1
$ – fixed 578.0 5.79% n/a 56
  – floating 1,521.7 n/a LIBOR n/a
£ – fixed 400.0 5.69% n/a 88
  – floating 376.7 n/a LIBOR n/a
– fixed 742.0 6.80% n/a 58
  – floating 603.9 n/a LIBOR n/a
¥ – fixed 68.0 2.07% n/a 5
$C2 – floating 53.6 n/a LIBOR n/a
Other 41.8 n/a LIBOR n/a
  4,385.7  
2007
Currency

£m
Fixed
rate1
Floating
basis
Period
(months)1
$ – fixed 528.9 5.64% n/a 103
  – floating 384.5 n/a LIBOR n/a
£ – fixed 400.0 6.19% n/a 135
  – floating 213.7 n/a LIBOR n/a
– fixed 165.3 7.39% n/a 51
  – floating 605.7 n/a EURIBOR n/a
¥ – fixed 40.6 2.07% n/a 72
Other 9.3 n/a LIBOR n/a
  2,348.0  

Notes

1
Weighted average. These rates do not include the effect of gains on interest rate swap terminations that are written to income over the life of the original instrument.
At 31 December 2008 the amounts still to be written to income were £2.7 million in respect of US dollar swap terminations, to be written to income evenly until June 2014.
2
Represents Canadian dollars.

The following table is an analysis of future anticipated cash flows in relation to the Group’s financial derivatives, which include interest rate and foreign exchange swaps:

2008 Financial liabilities Financial assets

 
Payable
£m
Receivable
£m
Payable
£m
Receivable
£m
Within one year 828.2 814.2 483.0 613.9
Between one and two years 62.5 58.8 93.3 131.1
Between two and three years 69.6 66.1 66.5 93.2
Between three and four years 73.3 69.2 92.3 114.2
Between four and five years 425.0 478.4 817.9 903.3
Over five years 1,401.4 1,186.6 1,107.3 1,152.5
  2,860.0 2,673.3 2,660.3 3,008.2
2007 Financial liabilities Financial assets

 
Payable
£m
Receivable
£m
Payable
£m
Receivable
£m
Within one year 422.8 411.3 581.2 588.5
Between one and two years 133.8 131.7 146.2 158.9
Between two and three years 78.3 76.0 60.8 63.4
Between three and four years 82.0 77.1 62.8 65.4
Between four and five years 83.1 77.7 63.9 65.6
Over five years 1,717.9 1,644.9 1,319.7 1,381.4
  2,517.9 2,418.7 2,234.6 2,323.2

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