The Board of Directors
The Board is collectively responsible for promoting the success of the Company by directing and supervising the Company’s policy and strategy and is responsible to share owners for the Group’s financial and operational performance. Responsibility for the development and implementation of Group policy and strategy and for day‑to‑day management issues is delegated by the Board to the Group chief executive and the other executive directors.
For the year under review, Philip Lader continued as chairman of the Board, responsible for the leadership of the Board. Sir Martin Sorrell, as the Group chief executive, continued to be responsible for the development and implementation of policy and strategy and for the day-to-day operations of the Group. The biographies of the current Board members appear in Who runs WPP.
All directors are fully briefed on important developments in the various business activities which the Group carries out worldwide and regularly receive extensive information concerning the Group’s operations, finances, risk factors and its people, enabling them to fulfil their duties and obligations as directors. The directors are also frequently advised on regulatory and best practice requirements which affect the Group’s businesses on a global basis.
During 2011, the Board met seven times formally and held 17 committee meetings throughout the year. With the exception of Lubna Olayan, Tim Shriver, Colin Day, John Quelch, Paul Spencer, Sol Trujillo and Orit Gadiesh (each absent for one meeting) and Ruigang Li (absent for four meetings) and Koichiro Naganuma (who was only able to attend one meeting), there was full attendance at all formal meetings of the Board during 2011.
The Board was composed of 16 directors in 2011. Three members are executive directors and 12, plus the chairman, are non-executive directors. The Board considers that 10 of the 12 non-executive directors, in addition to the chairman, are independent. John Quelch and Koichiro Naganuma are the only non-executive directors the Board considers are not independent.
The shareholdings of non-executive directors are set out in How we're rewarded. Non-executive directors do not participate in the Company’s pension, share option or other incentive plans, but may receive a part of their fees in ordinary shares of the Company and may participate in the Company’s deferred compensation program.
The Board considers that the non-executive directors’ remuneration conforms with the requirements of the UK Corporate Governance Code.
The fees payable to non-executive directors represent compensation in connection with Board and Board committee meetings and where appropriate for devoting additional time and expertise for the benefit of the Group in a wider capacity.
Details of directors’ remuneration and service contracts form part of the report of the Compensation Committee.
In accordance with the UK Corporate Governance Code, the directors will submit themselves for annual re-election at each Annual General Meeting. Directors may be appointed by share owners by ordinary resolution or by the Board on the recommendation of the Nomination and Governance Committee and must then stand for re-election at the next Annual General Meeting where they may be re-elected by ordinary resolution of the share owners.
The Board recommends that share owners vote in favour of the resolutions to re-elect those directors of the Company standing for re-election and sets out their reasons for this recommendation in the Appendix to the Notice of the Annual General Meeting.
The attendance of non-executive directors at meetings of the committees of the Board during 2011 was as follows:
|Nomination and |
- By invitation, the chairman attended all of the Audit Committee meetings.
- By invitation, Bud Morten attended all but one of the Audit and Compensation Committee meetings and all of the Nomination and Governance Committee meetings.
During 2011, the Sustainability Committee, chaired by Paul Richardson, met once on a formal basis and had many informal discussions. Read its Sustainbility Report for 2011.
The Disclosure Committee, which met four times during 2011, is comprised of senior executives from Group financial reporting, internal audit, treasury, legal, tax, human resource and investor relations departments. The purpose of the Disclosure Committee is to add further assurance to the Board and its committees in relation to the content of major financial public statements and advises the Audit Committee and the Board on their disclosure obligations generally and the Disclosure and Transparency Rules so as to enable the Board to comply with all relevant provisions.
The Company’s Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a director has an interest that conflicts, or may possibly conflict, with the interests of the Company (Situational Conflicts). The Board has a formal system in place for directors to declare Situational Conflicts to be considered for authorisation by those directors who have no interest in the matter being considered. In deciding whether to authorise a Situational Conflict, the non-conflicted directors must act honestly and in good faith with a view to the best interests of the Company and they may impose limits or conditions when giving the authorisation, or subsequently, if they think this is appropriate.
Any Situational Conflicts considered, and any authorisations given, are recorded in the relevant minutes. The prescribed procedures have been followed in deciding whether, and on what terms, to authorise Situational Conflicts and the Board believes that the systems it has in place for reporting and considering Situational Conflicts continue to operate effectively.
The relationship with share owners, potential share owners and investment analysts is given the highest priority by the Company.
The Company has a well-developed and continuous program to address the needs of share owners, investment institutions and analysts for a regular flow of information about the Company, its strategy, performance and competitive position. Given the wide geographic distribution of the Company’s current and potential share owners, this program includes regular visits to investors, particularly by the Group chief executive, the Group finance director, the deputy Group finance director and the head of investor relations, in the UK, Continental Europe and the major financial centres in North America and also in Asia Pacific and Latin America. The Company provides a preliminary announcement, an interim management statement at the end of the first and third quarters which includes a trading update, an interim report at half year and a trading update and presentation at the Annual General Meeting.
The Company ensures that it has a proper dialogue with share owners and their representative bodies through executive and non-executive directors in relation to remuneration and corporate governance matters as and when appropriate. The chairman provides feedback to the Board on issues raised with him by share owners.
WPP’s website, www.wpp.com, provides current and historical financial information, including trading statements, news releases and presentations and the Company’s statement of its corporate governance practices.
WPP operates a system of internal control, which is maintained and reviewed in accordance with the UK Corporate Governance Code and the guidance in the Turnbull Report as well as Rules 13a-14 and 15 under the Securities Exchange Act 1934. In the opinion of the Board, the Company has complied throughout the year and up to the date of the approval of this Annual Report and Accounts with the Turnbull Report and has also complied with the relevant provisions of the Securities Exchange Act 1934.
The Board (which receives advice from the Audit Committee) has overall responsibility for the system of internal control and risk management in the Group and has reviewed the effectiveness of the system during the year and up to the date of this report. In the context of the scope and complexity of this system, the Board can only give reasonable, not absolute, assurance against material misstatement or loss. The system of controls is designed to manage, but may not eliminate, the risks of failure to achieve WPP’s objectives. For certain joint ventures and associates, WPP operates controls over the inclusion of their financial data but places reliance upon the systems of internal control operating within our partners’ infrastructure and the obligations upon partners’ boards relating to the effectiveness of their own systems.
The principal elements of internal control are described below.
The quality and competence of our people, their integrity, ethics and behaviour are all vital to the maintenance of the Group’s system of internal control.
The Code of Business Conduct (which is regularly reviewed by the Audit Committee and the Board) and was updated in 2011, sets out the principal obligations of all employees. Directors and senior executives throughout the Group are required each year to sign this Code. The WPP Policy Book (which was also updated in 2011) includes the Code of Business Conduct and human resource practices, as well as guidance on practices in many operational areas. Breaches or alleged breaches of this Code of Conduct are investigated by the director of internal audit and the Group chief counsel.
The Group has an independently-operated helpline, Right to Speak, to enable our people to report issues that they feel unable to raise locally. A number of issues have been raised during 2011 through 42 calls to this helpline, all of which have been followed through and investigated where appropriate and reported to the Audit Committee.
Risk monitoring of all of the Group’s operations throughout the world is given the highest priority by the Group chief executive, the Group finance director, the chairman of the Audit Committee and the Board, as it is essential to the creation and protection of share owner value and the development of the careers of our people. The Board realises that WPP is a service company and its ongoing prosperity depends on being able to continue to provide a quality service to its existing and potential clients in a creative, efficient and economic way.
Identification, management and monitoring of sustainability risks (including social, environmental and ethical risks) is fully integrated into the Group’s risk management processes.
At each Board meeting, the Group chief executive presents a Brand Check review of each of the business’ operations, including an assessment of the risk in each business, providing feedback on the business risks and details of any change in the risk profile since the last Board meeting.
The Brand Check covers such issues as:
- the possibility of the win or loss of major business (e.g. as a result of a change of senior management at a major client);
- the addition or loss of a key executive of the Group;
- introduction of new legislation in an important market;
- sustainability, including risks relating to marketing ethics, privacy and employment;
- political instability in an important market; and
- changes in accounting or corporate governance practice.
Each operating group undertakes monthly and quarterly procedures and day-to-day management activities to review their operations and business risks. These are formally communicated to the Group chief executive, other executive directors and senior executives in monthly reports and quarterly review meetings and, in turn, to the Board.
Paul Richardson provides an annual assessment of sustainability risks and performance to the Nomination and Governance Committee.
The Board is firmly of the opinion that the monitoring of risk is strongly embedded in the culture of the Company and of the operating companies, in a manner which the Board considers goes beyond the Turnbull recommendations and the requirements of Rules 13a-14 and 15 under the Securities Exchange Act 1934.
Principal risks and uncertainties
The Board has considered the principal risks and uncertainties affecting the Group as at 31 December 2011 and up to the date of this report. These are described in alphabetical order in the table below. As set out above, the Group has specific policies in place to ensure that risks are properly evaluated and managed at the appropriate level within the Group.
|Issue||Potential impact||How it is managed|
|The Group competes for clients in a highly competitive industry and client loss may reduce market share and decrease profits.||Competitors include large multinational advertising and marketing communication companies and regional and national marketing services companies. New market participants include database marketing and modelling companies, telemarketers and internet companies. Service agreements with clients are generally terminated by the client on 90 days’ notice and many clients put their advertising and communications business up for competitive review from time to time. The ability to attract new clients and to retain existing clients may also in some cases be limited by clients’ policies about conflicts of interest.||Operating companies seek to establish reputations in the industry that attract and retain clients, including by improving the quality of their creative output.
The Group’s different agency networks limit potential conflicts of interest and the Group’s cross-discipline team approach seeks to retain clients.
Brand Check at every Board meeting.
|The Group receives a significant portion of its revenues from a limited number of large clients and the loss of these clients could adversely impact the Group’s prospects, business, financial condition and results of operations.||A relatively small number of clients contribute a significant percentage of the Group’s consolidated revenues. The Group’s 10 largest clients accounted for almost 17.2% of revenues in the year ended 31 December 2011. Clients generally are able to reduce advertising and marketing spend or cancel projects on short notice. The loss of one or more of the Group’s largest clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect the Group’s financial condition.||Global client account managers seek to ensure the Group maintains partnership relationship with major clients. Operating companies seek to establish reputations in the industry that attract and retain clients and key talent.
Brand Check at every Board meeting and regular dialogue between directors of the Company and directors of the Group’s largest clients.
|Damage to WPP’s reputation from undertaking controversial client work.||The operating companies may undertake controversial client accounts and may not always consider the impact on the Group.||Upward referral process established and communicated via the WPP Policy Book and ethics training. WPP’s Ethics Committee discusses cases of concern and identifies new risk areas.|
|Marketing ethics, compliance with marketing standards, and increasing transparency about our marketing practices.||Failure to comply with all laws and industry codes governing marketing material could impact the Group’s reputation or its relationship with clients.||Managed by our companies with referral to WPP Business Code of Conduct and WPP directors as necessary.|
|Compliance with privacy and data protection regulations.||Failure to adequately protect data could impact the Group’s reputation and create risk of litigation. Increased regulation unless the operating companies meet best practice standards, contribute to the debate on privacy, increase transparency for consumers on how their data are obtained and used.||The Group assists our companies in developing principles on privacy and compliance with local laws. Our key digital marketing and research companies have nominated senior executives to provide leadership on privacy and to work with other companies in the Group.|
|Climate change, including the emissions from energy used in our offices and during business travel.||Negative cost and reputational impact if the Group failed to meet target to reduce per head carbon intensity to 1.2 tonnes by 2020 (from 3.3 tonnes in 2006).||Cross-functional, Group-wide Environmental Action Teams and a network of company Climate Champions help implement our climate change strategy. Some companies have appointed environmental managers.|
|The Group’s businesses are subject to economic and political cycles. Many of the economies in which the Group operates (including the Eurozone) have significant economic challenges.||Reduction in client spending or postponing spending on the services offered by the Group or switching of client expenditure to non-traditional media and renegotiation of contract terms leading to reduced profitability and cash flow.||Reduction in headcount and overhead. Ensuring that variable staff costs are a significant proportion of total staff costs and revenue.
Increased controls over capital expenditure and working capital.
Strategic focus on BRICs, the Next 11, new media and consumer insight. Consideration of the impact on the Group if certain countries left the Euro, or in the event the Euro was devalued.
Brand Check at every Board meeting.
|Currency exchange rate fluctuations could adversely impact the Group’s consolidated results.||The Company’s reporting currency is pounds sterling. Given the Group’s significant international operations, changes in exchange rates cause fluctuations in the Company’s results when measured in pounds sterling.||The balance sheet and cash flows of the Company are hedged by borrowing in the currency of those cash flows.
The Company publishes and explains its results in constant currency terms, as well as in sterling and on an actual dollar basis.
|Changes to the Group’s debt issue ratings by the rating agencies Moody’s Investor Services and Standard and Poor’s Rating Service may affect the Group’s access to debt capital.||The Company’s long-term debt is currently rated Baa2 and BBB by the rating agencies respectively and the Company’s short-term debt obligations P2 and A2 respectively. If the Company’s financial performance and outlook materially deteriorate, a ratings downgrade could occur and the interest rates and fees payable on certain of the Company’s revolving credit facilities and certain of our bonds could be increased.||Active dialogue with the rating agencies to ensure they are fully apprised of any actions that may affect the Company’s debt ratings. The Company also seeks to manage its financial ratios and to pursue policies so as to maintain its investment grade ratings.|
|The Group may be unable to collect balances due from any client that files for bankruptcy or becomes insolvent.||The Group is generally paid in arrears for its services. Invoices are typically payable within 30 to 60 days.
The Group commits to media and production purchases on behalf of some of its clients as principal or agent depending on the client and market circumstances. If a client is unable to pay sums due, media and production companies may look to the Group to pay such amounts to which it committed as an agent on behalf of those clients.
|Evaluating and monitoring clients’ ongoing creditworthiness and in some cases requiring credit insurance or payments in advance.|
|Mergers & Acquisitions|
|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.||The Group regularly reviews potential acquisitions of businesses that are complementary to its operations and clients needs. If material risks are not identified prior to acquisition or the Group experiences difficulties in integrating an acquired business, it may not realise the expected benefits from such acquisition and the Group’s financial condition could be adversely affected.||Business, legal, tax and financial due diligence carried out prior to acquisition to seek to identify and evaluate material risks and plan the integration process. Warranties and indemnities included in purchase agreements.
Audit Committee oversight of acquisition and Board oversight of material acquisitions and review of the integration and performance of recent and prior acquisitions.
|Goodwill and other intangible assets recorded on the Group’s balance sheet with respect to acquired companies may become impaired.||The Group has a significant amount of goodwill and other intangible assets recorded on its balance sheet with respect to acquired companies. The Group annually tests the carrying value of goodwill and other intangibles for impairment. The estimates and assumptions about results of operations and cash flows made in connection with impairment testing could differ from future results of operations and cash flows. Future events could cause the Group to conclude that the asset values associated with a given operation have become impaired which could have a material impact on the Group’s financial condition.||Regular impairment testing which is a recurring agenda item for the Audit Committee.|
|The Group operates in 107 countries and is exposed to the risks of doing business internationally.||The Group’s international operations are subject to exchange rate fluctuations, restrictions and/or taxation on repatriations of earnings, social, political and economic instability, conflicts of laws and interpretation of contracts.||Affiliate, associate and joint venture structures with local partners used in developing markets.
Brand Check at every Board meeting.
Uniform approach to internal controls to seek to ensure best practice employed in all jurisdictions.
|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.||The Group is highly dependent on the talent, creative abilities and technical skills of our personnel as well as their relationships with clients. The Group is vulnerable to the loss of personnel to competitors and clients leading to disruption to the business.||The Group’s incentive plans are structured to provide retention value for example by paying part of annual incentives in shares that vest two years after grant and having a five-year performance period for LEAP.
Operating companies seek to establish reputations in the industry that attract and retain key personnel, including by improving the quality of their creative output.
Succession planning of key executives is a recurring agenda item of the Board and Nomination and Governance Committee.
|Employment practices, including diversity and equal opportunities, business ethics, employee development, remuneration, communication and health and safety.||Failing to meet standards on diversity and gender would impact the perception of the Group and quality of work.||Human resources policies are set and implemented at operating company level. WPP’s chief talent officer assists the companies in attracting and developing our talent and to share best practice on issues such as recruitment, remuneration, engagement, diversity and training.|
|The Group may be subject to regulations affecting its activities.||Governments, government agencies and industry self-regulatory bodies from time to time adopt statutes and regulations that directly or indirectly affect the form, content and scheduling of advertising, public relations and public affairs and market research or otherwise limit the scope of the activities of the Group and its clients which could have a material adverse impact on our financial position. Changes in tax laws or their application may also adversely affect the Group’s reported results.||The Group actively monitors any proposed regulatory or statutory changes and consults with government agencies and regulatory bodies where possible on such proposed changes.
Regular briefings to the Audit Committee of significant regulatory or statutory changes.
Group representation on a number of industry advisory bodies.
|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.||The Group may be, or may be joined as a defendant, in litigation brought against its clients in respect of services provided by the Group.||The Group seeks to comply with all laws and industry codes governing marketing material.
Upward referral procedure within operating companies and to WPP ethical review meetings.
|The Group operates in 107 countries and is subject to increased anti-corruption legislation and enforcement not only in the US and UK.||The Group may be exposed to liabilities in the event of breaches of anti-corruption legislation.||Online and in-country ethics and anti-bribery and corruption training on a Group-wide basis to raise awareness and seek compliance with the WPP Code of Conduct.
Confidential helpline for WPP staff to raise any concerns which are investigated and reported to the Audit Committee on a regular basis.
Due diligence on selecting and appointing suppliers and acquisitions.
Gift and hospitality register and approvals process.
Control activities and monitoring
Policies and procedures for all operating companies are set out and communicated in the WPP Policy Book, internal control bulletins and accounting guidelines. The application of these policies and procedures is monitored within the individual businesses and by the Company’s director of internal audit and the Group chief counsel.
Operating companies are required to maintain and update documentation of their internal controls and processes. This documentation incorporates an analysis of business risks, detailed control activities and monitoring, together with controls over security of data and the provision of timely and reliable information to management. IT and financial controls are also included.
The internal audit department was responsible for reviews and testing of the documentation and the relevant controls for a majority of the Group during 2011, the results of which were reported to the Audit Committee.
Each operating company annually updates a three-year strategic plan which incorporates financial objectives. These are reviewed by the parent company’s management and are agreed with the chief executive of the relevant operating company.
The Group operates a rigorous procedure for the development of operating company budgets which build up the Group’s budget. During the final quarter of each financial year, operating companies prepare detailed budgets for the following year for review by the parent company. The Group’s budget is reviewed by the Board before being adopted formally. Operating company results are reported monthly and are reviewed locally, regionally and globally by the business groups and by Group management on a consolidated basis and ultimately by the Board. The results are compared to budget and the previous year, with full-year forecasts prepared and updated quarterly throughout the year. The Company reports to share owners four times a year.
At each year-end, all operating companies supply their full-year financial results with such additional information as is appropriate. This information is consolidated to allow the Group to present the necessary disclosures for International Financial Reporting Standards (IFRS) including International Accounting Standards (IAS).
The Disclosure Committee gives further assurance that publicly-released information is free from material omission or misstatement.
The provisions of section 404 of the Sarbanes-Oxley Act require the Company’s management to report on the effectiveness of internal control over financial reporting in its Annual Report on Form 20-F which is filed with the US Securities and Exchange Commission. The 2010 assessment and related report from the external auditors confirmed that the Company’s internal control over financial reporting was effective and included in the Company’s Annual Report on Form 20-F for the year ended 31 December 2010. The 2011 assessment and related report will be included in the Company’s Annual Report on Form 20-F due to be published in April 2012.
The directors are required to consider whether it is appropriate to prepare the financial statements on the basis that the Company and the Group are going concerns. As part of its normal business practice, the Group prepares annual and longer-term plans and in reviewing this information and in particular the 2012 three-year plan and budget the directors believe that the Company and the Group have adequate resources for the foreseeable future. Therefore the Company and the Group continue to adopt the going concern basis in preparing the financial statements.
Further details of the Group’s financial position and borrowing facilities are described in note 10 of the financial statements.
The directors are responsible for preparing the financial statements in accordance with applicable law and regulations. The directors have elected to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs) and have also elected to prepare financial statements for the Company in accordance with UK accounting standards. Company law requires the directors to prepare such financial statements in accordance with the Companies (Jersey) Law 1991.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’.
In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. Directors are also required to:
- properly select and apply accounting policies;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
- provide additional disclosures, when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
- make an assessment of the Company’s ability to continue as a going concern.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ report and directors’ remuneration report.
The directors are responsible for the maintenance and integrity of the Company website. Jersey legislation and UK regulation governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.
The directors confirm that so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware. Each director has taken all the steps that he or she ought to have taken, as a director, in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.
The following information, together with the letters from the chairmen of the Nomination and Governance, Audit and Compensation Committees, the statements regarding directors’ responsibilities and statement of going concern set out above and the directors’ remuneration and interests in the share capital of the Company set out in the Directors’ report, are included in the Directors’ report, which also includes the sections ‘Letter to share owners,’ ‘Who runs WPP’ and ‘What we think’.
As at 20 April 2012, the Company is aware of the following interest of 3% or more in the issued ordinary share capital:
The disclosed interest refers to the respective combined holdings of this entity and to interests associated with it.
The Company has not been notified of any other holdings of ordinary share capital of 3% or more.
The profit before tax for the year was £1,008.4 million (2010: £851.3 million). The directors declared a second interim dividend of 17.14p (2010: 11.82p) per share to be paid on 9 July 2012 to share owners on the register at 8 June 2012 which, together with the first interim ordinary dividend of 7.46p (2010: 5.97p) per share paid on 14 November 2011, makes a total of 24.60p for the year (2010: 17.79p).
Collectively, WPP companies made £4.8 million of charitable donations in 2011. More detailed information regarding the Group’s support of charities is set out in the section dealing with sustainability.
It is the Company’s policy not to make payments for political purposes.
In addition to the financing agreements to which the Company is a party, details of which are given in note 24 in the Financial statements, the Company is a party to an agreement with Asatsu-DK Inc dated 3 August 1998 pursuant to which WPP subscribed for 20% (at that time) of the share capital of Asatsu and Asatsu subscribed for approximately 4% (at that time) of the issued share capital of WPP. The respective shareholdings may only be transferred following a procedure set out in the agreement. WPP and Asatsu are each entitled to nominate a non-executive director to the board of the other subject to retaining its shareholding in the other.
Each of the €600 million 4.375% bonds due in December 2013, the £400 million 6% bonds due in April 2017, the €500 million 5.25% bonds due in January 2015, the €750 million 6.625% bonds due May 2016, the £200 million 6.375% bonds due November 2020, the £450 million 5.75% convertible bonds due May 2014, the $600 million 8% bonds due September 2014 and the $812 million 4.75% bonds due November 2021, contain provisions which are triggered on a change of control of the Company. The holders of such bonds (other than the £450 million 5.75% bonds) have the right to repayment at par (except for holders of the $600 million 8% bonds and the $812 million 4.75% bonds where the holders have the right to redeem the bonds at 101% of par) if the Company is non-investment grade at the time of the change of control or becomes non-investment grade within 120 days of the announcement of the change of control.
In addition the Group has a Revolving Credit Facility in the amount of $1,050 million and £375 million due November 2016, the terms of which require the consent of the majority of the lenders if a proposed merger or consolidation of the Company would alter its legal personality or identity.
The impact of a change of control on WPP’s incentive plans is dealt with in How we're rewarded.
There are no restrictions on amending the Articles of Association of the Company other than the need to pass a special resolution of the share owners.
The principal activity of the Group continues to be the provision of communications services worldwide. The Company acts only as a parent company and does not trade.
The Company’s authorised share capital consists solely of 1,750,000,000 ordinary 10 pence shares. The Company operates an American Depositary Receipt program. The rights and obligations relating to the ordinary share capital are outlined in the Articles of Association; there are no restrictions on transfer, no restrictions on voting rights and no securities carry special voting rights with regard to control of the Company.
At the Annual General Meeting in June 2011, share owners passed resolutions authorising the Company, in accordance with its Articles of Association, to allot shares up to a maximum nominal amount of £43,088,586 of which £6,333,996 could be allotted for cash free of statutory pre-emption rights. In the year under review no shares were issued for cash free from pre-emption rights. Details of share capital movements are given in note 26 in the Financial statements.
At the Annual General Meeting in 2011 share owners passed a special resolution authorising the Company, in accordance with its Articles of Association, to purchase up to 126,473,546 of its own shares in the market. In the year under review, 25,944,143 ordinary shares of 10 pence each were purchased at an average price of £7.02 per share.
The Company has no trade creditors because it is a parent company and does not generate trading revenues. Accordingly, no disclosure can be made of year-end trade creditor days. However, the Group’s policy is to settle the terms of payment with suppliers when agreeing the terms of each transaction and to ensure that suppliers are made aware of the terms of payment and to abide by the terms of payment. The average trade creditors for the Group, expressed as a number of days, were 41 (2010: 42).
The directors will propose a resolution at the Annual General Meeting to re-appoint Deloitte LLP as auditors.
By Order of the Board:
Marie Capes Company Secretary 20 April 2012
- The sections headed ‘Letter to share owners’, ‘Who we are’ and ‘What we think’ should be read in conjunction with and as part of the section headed Directors’ report.