2001 Annual Report
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1WPPWho we are Who we are WPP is one of the world’s leading communications services groups. Our companies provide communications services to clients around the world, including more than 300 of the Fortune Global 500, over one-half of the Nasdaq 100 and over 30 of the Fortune e-50. Our 65,000 people work from 1,400 offices in 103 countries. Every WPP company is a distinctive brand in its own right; all with their own identities and own areas of expertise. That is their strength. What they have in common is in harnessing intelligence, talent and experience to bring competitive advantage to their clients. WPP, as a parent, complements the professional activities of our individual operating companies through initiatives and programs that provide greater value to our clients, competitive advantage to our companies, opportunities and rewards for our people.* Through our companies and associates, WPP offers a comprehensive and, when appropriate, integrated range of communications services to national, multinational and global clients. Our companies work with over 330 clients in three or more disciplines. More than 150 clients are served in four disciplines; over 100 clients are served in six or more countries. * See www.wpp.com 2WPPWho we are 3 WPP Who we are our companies and associates our companies and associates Our companies and associates Advertising – IBOPE Media Information1 The Brand Union: Good Technology Sector marketing Asatsu-DK1 – Mediafax Addison Corporate Marketing* www.goodtechnology.com Corporate/B2B www.asatsu-dk.co.jp www.mediafax-pr.com www.addison.co.uk The Grass Roots Group1 Brouillard Batey1 Goldfarb Consultants BDG McColl* www.grg.com www.brouillard.com www.bateyads.com.sg www.goldfarbconsultants.com www.bdgmccoll.com High Co1 Ogilvy Primary Contact Chime Communications PLC1 IMRB International1 BPRI* www.highco.fr www.primary.co.uk www.chime.plc.uk www.imrbint.com www.bpri.co.uk Imaginet Demographic marketing Dentsu, Young & Rubicam1,2,† Center Partners The Clinic* www.imaginet.com The Bravo Group† www.yandr.com www.centerpartners.com www.planetpoint.com/clinic KnowledgeBase Marketing† www.thebravogroupyr.com Equus1 Lightspeed Coley Porter Bell* www.knowledgebasemarketing.com The Geppetto Group J. Walter Thompson Company www.lightspeedresearch.com www.cpb.co.uk Mando Marketing www.geppettogroup.com www.jwt.com Ziment Group Dovetail* www.mando.co.uk Kang & Lee† Marsteller Advertising† www.zimentgroup.com www.dovetaillondon.com Maxx Marketing www.kanglee.com www.marsteller.com Eurosem* www.maxx-marketing.com The Market Segment Group1 Ogilvy & Mather Worldwide Public relations & public affairs www.eurosem.com OgilvyOne Worldwide www.marketsegment.com www.ogilvyone.com www.ogilvy.com BKSH† Lambie-Nairn* Mendoza Dillon & Asociados Red Cell www.bksh.com www.lambie-nairn.com RMG International www.mendozadillon.com 3 www.redcellnetwork.com Blanc & Otus MCA Communicates* Roundarch UniWorld1 SCPF1 www.blancandotus.com www.mcacommunicates.com www.roundarch.com www.uniworldgroup.com www.scpf.com Buchanan Communications MJM Creative* RTC Employer branding/recruitment Y&R Advertising† www.buchanan.uk.com www.mjmcreative.com www.rtcdc.com JWT Specialized Communications www.yandr.com Burson-Marsteller† Oakley Young* Savatar www.jwtworks.com www.bm.com www.oakley-young.co.uk www.savatar.com Foodservice 1 Media investment management Chime Communications PLC1 Walker Group/CNI* syzygy The Food Group www.wgcni.com www.syzygy.net www.thefoodgroup.com BJK&E† www.chime.plc.uk www.bjke.co.uk Cohn & Wolfe† Warwicks* ThompsonConnect Worldwide Investor relations www.warwicks-uk.com 1 CDP Media2 www.cohnwolfe.com VML International Presentations www.cdpmedia.com Finsbury www.vml.com www.intpres.com † The Digital Edge www.finsbury.com Healthcare Wunderman PR & sports marketing www.thedigitaledge.com Hill and Knowlton CommonHealth www.wunderman.com Global Sportnet Maximize www.hillandknowlton.com www.commonhealth.com www.globalsportnet.com Mediaedge:cia† Ogilvy Public Relations Worldwide Feinstein Kean Healthcare Specialist communications Première Group www.mediaedgecia.com www.ogilvypr.com www.fkhealth.com Strategic marketing consulting www.premiere-group.co.uk 3 Media Insight Penn, Schoen and Berland Medical Broadcasting Company Added Value PRISM Group www.mediainsight.com www.psbsurveys.com www.mbcnet.com www.added-value.com www.prismteam.com † 3 MindShare Robinson Lerer & Montgomery Ogilvy Healthcare Glendinning TWIi www.mindshareworld.com www.rlmnet.com Shire Health Group www.glendinning.com www.imgworld.com OHAL Timmons and Company www.shirehealth.com The Henley Centre* Real estate www.ohal.co.uk Wexler & Walker Public Policy Associates Sudler & Hennessey† www.henleycentre.com Pace Outrider www.wexlergroup.com www.sudler.com Management Ventures www.paceadv.com www.outrider.com www.mventures.com Technology Portland Outdoor Branding & identity Direct, promotion & pFour Consultancy* Banner Corporation† www.b1.com www.portlandoutdoor.com BrownKSDP relationship marketing www.pfour.co.uk www.brownksdp.com A. Eicoff & Co Planners Media & technology services 1 Information & consultancy CB’a www.eicoff.com www.planners.es Clockwork Capital 1 www.clockworkcapital.com The Kantar Group: www.cba.tm.fr Black Cat Quadra Advisory www.black-cat.co.uk www.quadraadvisory.com DigiReels Millward Brown Enterprise IG* 1 www.digireels.co.uk www.millwardbrown.com www.enterpriseig.com Brierley & Partners Tempus partners 1 icon brand navigation* www.brierley.com www.tempus-partners.com The Farm Research International www.farmpost.co.uk www.research-int.com www.icon-brand-navigation.com Concept! Custom media Landor Associates† www.concept.com Custom Media Group2 Metro Group Kantar Media Research www.metrobroadcast.co.uk – AGB Group1 www.landor.com Einson Freeman Forward www.agbgroup.com The Partners† www.einsonfreeman.com www.theforwardgroup.com 1 www.thepartners.co.uk EWA 2 Associate – BMRB International Shine:M 2 Joint venture www.ewa.ltd.uk 3 www.bmrb.co.uk Spafax Minority investment * Member of The Brand Union www.spafax.com † A Y&R company 4WPPWho we are 5 WPP Who we are How we’re doing Our 2001 results reflect record revenues and profits. Operating margins are in line with our revised objectives, narrowing the gap between ourselves and the very best-performing competition. 2000 2001 Restated Change % Turnover (gross billings) £20,887m £13,949m +49.7 Cost of sales £16,865m £10,968m +53.8 Revenues £4,022m £2,981m +34.9 Earnings before interest, tax, depreciation, and amortisation4 £607m £496m +22.4 Operating profit4 £506m £379m +33.5 PBIT1,4 £561m £433m +29.6 PBIT1,4 margin 14.0% 14.5% -0.5 Profit before tax £411m £366m +12.3 Diluted headline3 earnings per share 30.6p 30.1p +1.7 Diluted headline3 earnings per ADR2 $2.20 $2.28 -3.5 Ordinary dividend per share 4.50p 3.75p +20.0 Ordinary dividend per ADR2 32.4¢ 28.4¢ +14.1 Net debt at year-end £885m £25m -3,440.0 Average net debt £834m £423m -97.2 Share price at year-end 760.0p 872.0p -12.8 Market capitalisation £8,737m £9,631m -9.3 1 PBIT: Profit on ordinary activities before interest and taxation, excluding goodwill charges of £14.8 million (2000: £15.1 million), net investment gains of £6.8 million (2000: £nil) and write-downs of £70.8 million (2000: £nil). 2 One American Depositary Receipt represents five ordinary shares. For convenience these sterling figures have been translated to US dollars at the average rate for the period. 3 Headline earnings per ordinary share and ADR excludes goodwill charges, investment gains and write-downs. 4 The 2000 profit and loss account has been restated as a result of the implementation of FRS 17 (Retirement Benefits) in the Group’s financial statements. 6WPPHow we’re doing 7 WPP How we’re doing 2001 financial summary 1 Calculated gross of goodwill, revaluation reserve and using profit after tax. 2 PBIT: Profit on ordinary activities before interest and taxation, excluding goodwill charges, net investment gains and write-downs. 3 The 1999-2000 profit and loss account has been restated as a result of the implementation of FRS 17 (Retirement Benefits) in the Group’s 2001 financial statements. 1997 and 1998 have not been restated. 8WPPHow we’re doing 9 WPP How we’re doing Letter to share owners The rest of this letter is based on constant the collapse in equity valuations in At WPP, reported revenues fell by over 2% currency comparisons, more meaningful those sectors, and this was the principal in the first three months of 2002. On a given the relative strength of the dollar and reason why pre-tax profits rose by only like-for-like basis, revenues fell by almost sterling in 2001. On a like-for-like basis 12% to £411 million. 9%. Our objective is still to improve revenues were down by 3% and gross prof- We generated free cash flow of £504 margins to 15% this year, although it down by 4%, disappointing at face value, million, up 68% over last year, which market conditions will make this a but relatively strong when you consider was more than absorbed by acquisition difficult target to achieve. that the worldwide advertising market payments and investments of £736 million, Our raison d’être continues to be to was probably down by 5% and marketing share repurchases and cancellations of find ways of adding value to our clients’ services flat to down as well. Your Company £103 million and dividends of £44 million. businesses and our people’s careers and probably continued to build market share. Partly as a result, average net debt rose thus justify WPP’s existence. Our goal Given the more difficult world economic to £834 million, up £385 million at remains to become the world’s most conditions, your Company’s revenue 2001 exchange rates. Your Board is successful and preferred provider of growth objective has been modified from comfortable with this level of gearing, communications services to multinational 5-10% to 0-5% for the near term.