The Board of WPP announces its unaudited interim results for the six months ended 30 June 2010. The results reflect the recovery in the world economy, following the massive fiscal and monetary stimulus in response to the sub–prime, insurance monoline, Lehman and other elements of the crises.
Billings were up 8.5% at £20.333 billion.
Reportable revenue was up 3.5% at £4.441 billion. Revenue on a constant currency basis, was up 2.7% compared with last year, chiefly reflecting the comparative weakness of the pound sterling against most currencies other than against the US dollar and Euro. As a number of our competitors report in US dollars and inter–currency comparisons are difficult, the Unaudited condensed consolidated interim income statement: Reportable US dollar illustration shows WPP's interim results in reportable US dollars, where revenues were up 5.5% to $6.757 billion.
On a like–for–like basis, which excludes the impact of acquisitions and currency, revenues were up 2.5% in the first half. In the second quarter like–for–like revenues were up almost 5%, a significant escalation over flat like–for–like revenues in quarter one. This reflects increased client advertising and promotional (“A” & “P”) spending, (probably more “P” than “A”), across most of the Group's major geographic markets and functional sectors and also easier comparatives, although clients continue to demand increased effectiveness, efficiency and liquidity.
Headline earnings before interest, taxation, depreciation and amortisation (“EBITDA”) was up 23.1% to £560.8 million and up 19.3% in constant currencies. Headline operating profit was up 33.1% to £455.3 million from £342.2 million and up 27.9% in constant currencies.
Headline operating margins were up 2.3 margin points to 10.3% compared with 8.0% in the first half of last year. On a like–for–like basis operating margins were up 2.2 margin points. Headline gross margin margins were up 2.5 margin points to 11.2%. Given the significance of consumer insight revenues to the Group, this is probably a more meaningful measure of comparative, competitive margin performance.
On a reported basis, the Group's staff cost to revenue ratio, including incentives, fell by 1.7 margin points to 60.4% compared with 62.1% in the first half of 2009. On the same basis, the Group's staff costs to revenue ratio, excluding incentives, fell by 3.1 margin points to 57.6% from 60.7%. Short and long–term incentives and the cost of share–based incentives amounted to £127.4 million or 22.8% (around maximum performance), of operating profits before bonus and taxes, compared to £59.3 million last year, or 15.5%, up £68.1 million. Operating margins, before short and long–term incentives and the cost of share–based incentives, were 13.1% up 3.7 margin points compared with 9.4% last year.
On a like–for–like basis, the average number of people in the Group, excluding associates, was 100,008 in the first half of the year, compared to 109,504 in 2009, a decrease of 8.7%. On the same basis, the total number of people in the Group, excluding associates, at 30 June 2010 was 100,822 compared to 107,193 at 30 June 2009, a decrease of 6,371 or 5.9%. As at 30 June 2010, the number of people in the Group increased by 1,658 or 1.7% compared to the pro–forma figure at 31 December 2009, reflecting net hiring, particularly in the United States and in parts of Asia and Latin America, where like–for–like revenue growth is particularly strong.
Net finance costs (excluding the revaluation of financial instruments) were £99.1 million, compared with £90.0 million in 2009, an increase of £9.1 million, reflecting higher funding costs partly offset by lower levels of average net debt.
Headline profit before tax was up 41.2% to £356.2 million from £252.2 million, or up 32.8% in constant currencies.
Reported profit before tax rose by 36.0% to £243.9 million from £179.3 million. In constant currencies, reported profit before tax rose by 23.3%.
The tax rate on headline profit before tax was 23.9%, down 0.9 percentage points on the first half rate in 2009 of 24.8%.
Profits attributable to share owners rose by 39.1% to £150.8 million from £108.4 million.
Diluted headline earnings per share rose by 48.1% to 19.1p from 12.9p. In constant currencies, earnings per share on the same basis rose by 36.8%. Diluted reported earnings per share were up 36.4% to 12.0p and up 20.1% in constant currencies.
The Board declares an increase of 15% in the first interim ordinary dividend of 5.97p per share. The record date for this first interim dividend is 8 October 2010, payable on 8 November 2010.
Further details of WPP's financial performance are provided in the Unaudited condensed consolidated interim income statement: UK sterling.