Report to share owners
The Board of WPP announces its unaudited interim results for the six months ended 30 June 2008. These represent record levels of performance throughout all regions and sectors of the business and reflect good revenue and operating profit growth, operating margin improvement in line with objectives, a number of smaller acquisitions, currency gains, share buy-backs and a reduced tax charge.
Billings were up 11.8% at £16.871 billion.
Reportable revenue was up 14.3% at £3.339 billion. Revenue on a constant currency basis, was up 8.1% compared with last year, chiefly reflecting the strength of the euro against the pound sterling in the first six months. As a number of our competitors report in US dollars and inter-currency comparisons are difficult to make, the Unaudited condensed consolidated interim income statement: Reportable US dollar illustration shows WPP's interim results in reportable US dollars. This shows that US dollar reportable revenues were up 14.4% to $6.595 billion, headline profits up 18.2% to $895.8 million and diluted headline earnings per share up 21.1% to 43.6¢. Further analysis is included in the Unaudited condensed consolidated interim income statement: Reportable US dollar illustration.
On a like-for-like basis, which excludes the impact of acquisitions and currency, revenues were up 4.3% in the first half.
Headline earnings before interest, depreciation and amortisation (EBITDA) was up 17.5% to £531.9 million and up 9.1% in constant currencies.
Headline operating profit was up 18.4% to £453.4 million from £383.1 million and up 9.2% in constant currencies.
Headline operating margins rose yet again, in line with objectives, by 0.5 margin points to 13.6% from 13.1%, also in line with the full-year margin target of 15.5%. Before short- and long-term incentives (including the cost of share-based compensation), operating margins were almost flat at 16.1%. Short- and long-term incentives and the cost of share-based incentives amounted to £84.1 million or 16.3% of operating profits before bonus and taxes, compared to £92.2 million last year, partly as a result of currency movements, and partly the first-half impact of additional investment in staff and space costs.
On a reported basis the Group's staff cost to revenue ratio, including incentives, remained at 59.9% in the first half of 2008, the same as achieved in the same period last year, even after a continued investment in people. On a like-for-like basis, the average number of people in the Group, excluding associates, was 93,233 in the first half of the year, compared to 89,027 in 2007, an increase of 4.7%. On the same basis, the total number of people in the Group, excluding associates, at 30 June 2008 was 95,093 compared to 90,881 in June 2007, an increase of 4,212 or 4.6%. Of the additional 4,212 people at the end of June this year, 3,633 or 86% were added in the faster-growing markets of Asia Pacific, Latin America, Middle East and Africa and Central and Eastern Europe.
Net finance costs (excluding the revaluation of financial instruments) were £64.3 million compared with £45.1 million in 2007, an increase of £19.2 million, reflecting higher levels of net debt as a result of net acquisition investments and share repurchases over the previous 12 months.
Headline profit before tax was up 15.1% to £389.1 million from £338.0 million or up 4.9% in constant currencies, primarily reflecting the impact of higher pound sterling translation of interest costs on euro-denominated debt.
Reported profit before tax rose by 15.1% to £338.5 million from £294.1 million. In constant currencies pre-tax profits rose by 3.4%, again, primarily reflecting the impact of higher pound sterling translation of interest costs on euro-denominated debt.
The tax rate on headline profit before tax was 26.0%, down 0.9 percentage points on the first-half 2007 rate of 26.9%.
Profits attributable to share owners rose by 14.5% to £208.2 million from £181.9 million.
Diluted headline earnings per share rose by 21.4% to 22.1p from 18.2p. In constant currencies, earnings per share on the same basis rose by 9.3%. Diluted reported earnings per share were up 21.1% to 17.8p and up 6.4% in constant currencies.
The Board declares an increase of 20% in the interim ordinary dividend to 5.19p per share. The record date for this interim dividend is 10 October 2008, payable on 10 November 2008.
Further details of WPP's financial performance are provided in the Unaudited condensed consolidated interim income statement: UK sterling.