|
The following are the highlights of the results for 2002:
* Revenue down almost three per cent to £3.908 billion.
* Profit before goodwill and impairment, interest, tax, fixed asset
gains and investment write-downs down over 14 per cent to £480.2
million.
* Operating margins of 12.3 per cent.
* Profit before tax, goodwill and impairment, fixed asset gains,
investment write-downs and FRS17 interest down almost 19 per cent
to £400.6 million.
* Profit before tax down 50 per cent to £205.4 million.
* Diluted headline earnings per share down over 19 per cent to 24.9p
from 30.9p.
* Final dividend up 20 per cent to 3.67p per share making a total
for the year of 5.40p up 20 per cent over 2001.
* Strong estimated net new billings of over £2.4 billion ($3.6
billion). Ranked top on absolute net new billings won in 2002.
A press release states that despite very difficult trading
conditions throughout the world, these results reflect the achievement
of balancing the market pressure on revenues against reducing costs.
On a constant currency basis, revenue was up 0.7 per cent and
gross profit up 0.9 per cent. Like-for-like revenues, excluding
the impact of acquisitions and on a constant currency basis, were
down 5.9 per cent. Over the four quarters of 2002, like-for-like
revenues have fallen by decreasing amounts - more than -9 per cent
in quarter one, -8 per cent in quarter two, more than -3 per cent
in quarter three and less than -3 per cent in quarter four.
In quarter four, North America showed revenue growth for the first
time for seven quarters of almost 2 per cent.
Profit pre-goodwill and impairment, interest, tax, investment gains
and writedowns was down 14.4 per cent to £480.2 million from
£561.1 million and down almost 12 per cent in constant currencies.
Pre-goodwill and impairment, reported operating margins (including
income from associates) fell to 12.3 per cent from 14.0 percent.
Excluding income from associates, reported operating margins fell
less, by 1.4 per cent from 12.9 per cent to 11.5 per cent. Post
goodwill and impairment, reported profit before interest, tax, investment
gains and write-downs was down 44 per cent to £302.5 million
from £546.3 million.
Before incentive payments totalling £90.1 million or over
16 per cent (under 14 per cent in 2001) of operating profit before
bonuses, taxes and income from associates, operating margins fell
to 13.8 per cent from 14.9 per cent, reflecting stronger performance
of
some operating units against last year and increased provision for
the LEAP senior management incentive programme, due to stronger
than anticipated WPP total shareholder return against the peer group.
Reported operating costs including direct costs fell by almost
1 per cent, but rose by almost 3 per cent in constant currency.
However, like-for-like total operating and direct costs were down
4.6 per cent on the previous year. Staff costs excluding incentives
were flat, as were
total salaries. Non-staff costs rose as a proportion of revenues,
primarily reflecting the lumpiness of property costs as capacity
is reduced.
On a reported basis the group’s staff cost to gross margin ratio,
excluding severance and incentives, increased slightly to 56.9 per
cent from 56.6 per cent. Variable staff costs as a proportion of
total staff costs have increased over recent years, reaching 12.1
per cent in 2000. The impact of the recession in both 2001 and 2002
has reduced this ratio to 9.2 per cent and variable staff costs
as a proportion of revenue to 5.3 per cent.
This highlights the benefits of the increased flexibility in the
cost structure. Actual people numbers averaged 50,417 against 50,487
in 2001, down marginally. On a like-for-like basis, average headcount
was down
to 50,417 from 55,109, a decrease of over 8 per cent. At the end
of 2002 staff numbers were 49,439 compared with 52,670 at the end
of 2001 on a pro-forma basis, a reduction of over 6 per cent. Headcount
numbers have been falling by approximately half of one percent per
month.
Net interest payable and similar charges (including a charge for
the early adoption of FRS17) increased to £86.4 million from
£71.3 million, reflecting lower cash generated from operations,
the full year impact of the increased level of acquisition activity
in 2001 and share repurchases and cancellations in the current year.
Headline interest cover remains at the relatively conservative level
of almost six times and at six times, excluding the FRS17 charge.
Profit before tax, investment gains and write-downs fell by over
44 per cent to £302.5 million from £546.3 million. On
a constant currency basis, pre-tax profits were
down almost 43 per cent reflecting the strengthening of sterling
against the dollar, counterbalanced to some extent by its weakness
against the euro. If sterling
had stayed at the same average levels as 2001, profits on this basis
would have been £315.2 million.
The Group’s tax rate on headline profits was 26 per cent, down
from 27 per cent in the previous year, reflecting the impact of
further improvements in tax planning.
Diluted headline earnings per share were down over 19 per cent
at 24.9p. In constant currency, earnings per share on the same basis
were down under 16 per cent.
All severance and restructuring costs have been included in operating
profits.
Following the collapse in technology equity valuations in 2001,
it was considered prudent to write down the net balance sheet value
of the group’s investments in this area by £70.8 million.
2002 has seen further declines in
these technology investments, many of which are in private companies.
An additional write-down of £19.9 million has been taken in
2002, mitigated by gains on asset disposals of £9.2 million.
The carrying value of these investments is now written down to £19.3
million.
In addition, a further £145.7 million was taken as an impairment
charge primarily reflecting accelerated amortisation of goodwill
on first generation
businesses which have suffered in the recession.
This additional charge represents 3.2 per cent of the goodwill
shown in the balance sheet at the start of 2002.
As a result, profit before tax fell 50 per cent to £205.4
million and diluted earnings per share by almost 68 per cent to
7.7p.
The Board recommends an increase of 20 per cent in the final dividend
to 3.67p per share, making a total of 5.40p per share for 2002,
a 20% increase over 2001.
The record date for this dividend is 6 June 2003, payable on 7 July
2003. The dividend for 2002 is four and a half times covered by
headline earnings.
Also read
WPP Media to be renamed;
marketing activities at 53 per cent of the group revenue
Future outlook for WPP
in 2003
|
