How We're Doing (PDF

How we’re doing Financial summary 2009 2008 Change % Billings1 £37,919m £36,929m +2.7 Revenue £8,684m £ 7, 477m +16.1 Headline EBITDA2 £1,243m £1,291m -3.7 Headline operating profit2 £959m £1,072m -10.6 Reported operating profit £762m £876m -13.0 Headline PBIT2 £1,017m £1,118m -9.0 Headline PBIT margin2 11.7% 15.0% -3.3 Headline PBT2 £812m £968m -16.1 Reported PBT £663m £747m -11.3 Headline diluted earnings per share2,4 44.4p 55.5p -20.0 Headline diluted earnings per ADR2,3,4 $3.48 $5.14 -32.3 Ordinary dividend per share 15.47p 15.47p – Ordinary dividend per ADR3 $1.21 $1.43 -15.4 Net debt at year-end £2,640m £3,068m -14.0 Average net debt5 £3,448m £2,206m +56.3 Ordinary share price at year-end 609.5p 402.5p +51.4 ADR price at year-end $48.65 $29.59 +64.4 Market capitalisation at year-end £7,658m £5,053m +51.6 At 14 April 2010 Ordinary share price 705.5p ADR price $54.51 Market capitalisation £8,871m The financial statements have been prepared under International Financial Reporting Standards (IFRS). 1 Billings is defined on page 182. 2 The calculation of ‘headline’ measurements of performance (including headline EBITDA, headline operating profit, headline PBIT, headline PBT and headline earnings) is shown in note 31 of the financial statements. 3 One American Depositary Receipt (ADR) represents five ordinary shares.T hese figures have been translated for convenience purposes only using the income statement exchange rates shown on page 152. This conversion should not be construed as a representation that the pound sterling amounts actually represent, or could be converted into, US dollars at the rates indicated. 4 Earnings per share is calculated in note 9 of the financial statements. 5 Average net debt is defined on page 182. WPP ANNUAL REPORT 2009 15 How we’re doing Financial summary Revenue £m Headline EBITDA1 £m 5,374 5,908 6,186 7,477 8,684 877 1,002 1,072 1,291 1,243 8,684m 1,243m 05 06 07 08 09 05 06 07 08 09 Reported revenue growth of over 16% reflected the strength Headline EBITDA (headline earnings before interest, of the euro and US dollar against sterling, as well as the taxation, depreciation and amortisation) fell by less than 4% impact of TNS. On a constant currency basis, revenues were to £1.2 billion ($1.9 billion). up almost 5% and on a like-for-like basis, revenues were down 8.1%. Headline PBIT1 £m Headline diluted earnings per share1 p Headline PBIT1 margin % 755 859 928 1,118 1,017 Dividends per share p 35.2 41.2 45.8 55.5 44.4 20 20 16 16 12 12 8 8 4 4 1,017m 0 44.4p 0 05 06 07 08 09 05 06 07 08 09 Headline PBIT margin was 11.7% in 2009 against 15.0% Diluted headline earnings per share were down 20% to 44.4p. last year (or against 14.3% if TNS were included for the Dividends were maintained at 15.47p. whole of 2008). Headline PBIT fell 9% to £1,017 million, remaining above £1 billion for the second consecutive year. After-tax return on average capital employed2 % Relative TSR Rebased to 31 December 20043 200 Weighted average cost 14 9.6 11.5 11.8 12.3 8.9 WPP of capital (WACC) FTSE 100 12 150 10 Omnicom 8 Interpublic 100 6 Publicis 4 50 2 8.9% 0 0 05 06 07 08 09 31.12.04 31.12.05 31.12.06 31.12.07 31.12.08 31.12.09 After-tax return on average capital employed fell to 8.9%, Despite under-performing the FTSE 100 Index, WPP with the weighted average cost of capital falling to 7.2%. continued to do well against its US-based competitors. 1 The calculation of ‘headline’ measurements of performance (including headline EBITDA, headline PBIT and headline earnings) is shown in note 31 of the financial statements. 2 Calculated gross of goodwill and using profit after taxation before goodwill impairment and other goodwill write-downs, revaluation of financial instruments, amortisation and impairment of acquired intangible assets, share of exceptional losses/gains of associates, costs incurred in 2008 in changing the corporate structure of the Group and investment gains/losses and write-downs, and adjusted to reflect taxes and net finance costs paid. 3 Measured on a common currency basis. 16 WPP ANNUAL REPORT 2009 How we’re doing Financial Summary Average net debt4 and interest cover multiples £m Debt maturity5 £m 3 Net interest cover 10 1,212 1,214 1,458 2,206 3,448 – – 75 532 1,240 444 665 400 – 200 on headline PBIT2 8 6 4 2 3,448m 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19+ Net debt averaged £3.4 billion in 2009, up exactly £1.0 billion The Group continues to work to achieve continuity and from £2.4 billion in 2008 at 2009 exchange rates, principally flexibility of funding. Undrawn committed borrowing reflecting the net acquisition cost of TNS and other facilities are maintained in excess of peak net-borrowing acquisitions. Headline interest cover in 2009 was 5.0 times. levels and debt maturities are monitored closely. 2009 revenue1 by geography % 2009 headline PBIT1,2 by geography % North America 35 North America 40 UK 12 UK 13 Western Continental Europe6 26 Western Continental Europe6 18 Asia Paciﬁc, Latin America, Asia Paciﬁc, Latin America, Africa & Middle East and Africa & Middle East and Central & Eastern Europe6 27 Central & Eastern Europe6 29 Markets outside North America now account for over 65% The recession was most keenly felt in North America of our revenues, up from 61% five years ago. The influence and Western Continental Europe, particularly in the first of the faster-growing markets outside North America is six months. It was least felt in the UK and Asia Pacific, increasing rapidly. Latin America, Africa & Middle East and Central & Eastern Europe. 2009 revenue1 by sector % 2009 headline PBIT1,2 by sector % Advertising and Media Investment Advertising and Media Investment Management 39 Management 46 Consumer Insight7 26 Consumer Insight7 19 Public Relations & Public Affairs 9 Public Relations & Public Affairs 12 Branding & Identity, Healthcare Branding & Identity, Healthcare and Specialist Communications 26 and Specialist Communications 23 Marketing services rose to over 61% of our revenues in 2009, PBIT contributions were broadly in line with revenues, up from 56% in 2008, largely due to the impact of TNS with Branding & Identity, Healthcare and Specialist on Consumer Insight. It is no longer accurate to call us an Communications (including direct, digital and interactive) advertising agency, we are a communications services company. least affected by the recession. 1 Percentages are calculated on a constant currency basis. See definition on page 182. 2 The calculation of headline PBIT is set out in note 31 of the financial statements. 3 Interest excludes the revaluation of financial instruments. 4 Average net debt for 2005 includes amounts drawn down in that year on the Group’s working capital facility (the advance of cash financing against which certain trade debts were assigned). This facility was repaid and cancelled on 31 August 2005. 5 Includes corporate bonds, convertible bonds and bank loans payable at par value, excluding any redemption premium due, by due date. 6 The Group previously reported Continental Europe separately. Western Continental Europe is now reported separately, with Central & Eastern Europe included with Asia Pacific, Latin America, Africa & Middle East. 7 Consumer Insight was previously reported as Information, Insight & Consultancy. WPP ANNUAL REPORT 2009 17 How we’re doing Letter to share owners* Dear share owner A year ago, the downturn in the media sector in general weighed heavily on your share price despite the outlook for the wider sector being increasingly less relevant to your Company’s prospects: the many ways in which our business 009, our twenty-fourth year, was is being transformed by new markets, new media and new a brutal year for both WPP and the capabilities provide major opportunities to enhance our future growth and profitability. Pleasingly, since the year end, communications services industry your share price has increased a further 96.0p, or 16%, to as a whole. After a difficult first six 705.5p at the time of writing. Dividends were maintained 2months, however, the Group adjusted its at 15.47p, the same level as 2008. Billings were up almost 3% to £37.9 billion. Revenues cost base to falling like-for-like revenues were up over 16% to £8.7 billion. Our revenues exceeded and achieved the same pro-forma operating all our competitors for the second consecutive year, by margins in the second half of the year as an increasing amount. Headline PBIT margin was 11.7% in 2009 against 15.0% last year (or 14.3% including TNS in the second half of 2008. on a pro-forma basis for the whole of 2008). The Group Despite such a difficult year in the real achieved a Headline PBIT margin of 15.4% in the second world, total share owner return increased half of the year, equal to the margin achieved in the second half of 2008, including TNS, again on a pro-forma basis, sharply, with your share price rising over and in line with the target set at the time of the Group’s 200p, or 50%, to 609.5p from 402.5p 2009 half-year results announcement.

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