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  • www.wpp.com www.wppinvestor.com

    1. 1. www.wpp.com www.wppinvestor.com
    2. 2. Disclaimer <ul><li>This presentation does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of WPP Group plc (the &quot;Company&quot;) or any of its subsidiaries (together, the &quot;WPP Group&quot;) in any jurisdiction or an inducement to enter into investment activity. Any decision to purchase securities in the proposed offering should be made solely on the basis of the information contained in the offering memorandum to be published in relation to the proposed offering. </li></ul><ul><li>  </li></ul><ul><li>This presentation has been prepared by the Company solely for use in connection with the proposed offering. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. </li></ul><ul><li>  </li></ul><ul><li>This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Any investment or investment activity to which this presentation relates is available only to and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be available only to or will be engaged in only with Relevant Persons. </li></ul><ul><li>  </li></ul><ul><li>By your viewing this presentation you will be deemed to represent that you are not an affiliate (as defined in Rule 144 under the Securities Act) of the Company, that you are not acting on behalf of the Company or its affiliates and that either: (1) you are a qualified institutional buyer (as defined in Rule 144A under the Securities Act) and any purchase of securities discussed in the presentation will be for your own account or for the account of another qualified institutional buyer, and you are aware that the offering is being conducted in reliance on Rule 144A; or (2) you are not a U.S. person (as defined in Regulation S under the Securities Act) or any purchase of securities discussed in this presentation will be for the account or benefit of a U.S. person and will be made in an offshore transaction in accordance with Regulation S . </li></ul><ul><li>  </li></ul><ul><li>This presentation is made to and directed only at (i) persons outside the United Kingdom or (ii) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services & Markets Act 2000 (Financial Promotions) Order 2001 (the &quot;Order&quot;) or (iii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Order (all such persons together being referred to as &quot;Relevant Persons&quot;). </li></ul><ul><li>This presentation and its contents are confidential and must not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person, whether or not they are a Relevant Person. If you have received this presentation and you are not a Relevant Person you must return it immediately. </li></ul><ul><li>  </li></ul><ul><li>This presentation includes 'forward-looking statements'. These statements contain the words &quot;anticipate&quot;, &quot;believe&quot;, &quot;intend&quot;, &quot;estimate&quot;, &quot;expect&quot; and words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding WPP Group's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to WPP Group's products and services) are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of WPP Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding WPP Group’s present and future business strategies and the environment in which WPP Group will operate in the future. These forward-looking statements speak only as at the date of this presentation. WPP Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in WPP Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. </li></ul><ul><li>   </li></ul><ul><li>BNP Paribas, HSBC and The Royal Bank of Scotland plc (the &quot;Offering Managers&quot;) are acting for the Company in connection with the contents of this presentation and no-one else and will not be responsible to anyone other than the Company for providing the protections offered to clients nor for providing advice in relation to any of the contents of this presentation. Recipients are recommended to seek their own legal, financial, tax and other advice and should rely solely on their own judgment, review and analysis of this presentation. </li></ul><ul><li>Stabilisation/FSA </li></ul>
    3. 3. Investment Highlights <ul><li>WPP is the second largest advertising and marketing services company in the world with operating revenues of £5.9bn and billings of £30.1bn in 2006 </li></ul><ul><li>Over 97,000 people (including associates) in over 2,000 offices in 106 countries worldwide </li></ul><ul><li>Over 300 of the Fortune 500 and over 50% of the NASDAQ 100 are clients, more than 230 clients were serviced in four or more service disciplines </li></ul><ul><li>Strong and stable financial profile and strong cash conversion of profits </li></ul><ul><li>Experienced long-standing management </li></ul><ul><li>Quoted in London and on NASDAQ with market cap of c£9.4bn </li></ul><ul><li>Member of Forbes A-List (world's best big 400 companies), FTSE100, Euro FT300, Global FT500, Forbes International 500, Business Week 1000 </li></ul><ul><li>Committed to maintaining current investment grade ratings </li></ul>
    4. 4. Business Overview
    5. 5. Key Business Sectors <ul><li>Creation of communications strategy and development of marketing and branding campaigns </li></ul><ul><li>Advertisement production and design </li></ul><ul><li>Media planning and buying </li></ul>Advertising and Media Investment Management Information, Insight and Consultancy Public Relations and Public Affairs Branding & Identity, Healthcare and Specialist Communications <ul><li>Interactive and Direct marketing </li></ul><ul><li>Healthcare marketing </li></ul><ul><li>Providing identity and design services </li></ul><ul><li>Other specialist services such as ethnic, youth and sports marketing </li></ul><ul><li>Consumer, advertising, media and policy research </li></ul><ul><li>Tracking and evaluation of advertising and promotions </li></ul><ul><li>New product development and testing </li></ul><ul><li>International market studies management </li></ul><ul><li>Providing advice and services with respect to corporate, financial and marketing communications </li></ul><ul><li>Government lobbying </li></ul><ul><li>Crisis management and public affairs </li></ul>
    6. 6. <ul><li>Key brands: </li></ul><ul><ul><li>Ogilvy & Mather </li></ul></ul><ul><ul><li>JWT </li></ul></ul><ul><ul><li>Y&R Advertising </li></ul></ul><ul><ul><li>Grey Worldwide </li></ul></ul><ul><ul><li>GroupM </li></ul></ul><ul><ul><li>redcell/United </li></ul></ul>Key Business Sectors <ul><li>Key brands: </li></ul><ul><ul><li>Burson - Marsteller </li></ul></ul><ul><ul><li>Hill & Knowlton </li></ul></ul><ul><ul><li>Ogilvy Public Relations </li></ul></ul><ul><ul><li>Cohn & Wolfe </li></ul></ul><ul><ul><li>GCI </li></ul></ul>Advertising and Media Investment Management Information, Insight, and Consultancy Public Relations and Public Affairs Branding & Identity, Healthcare and Specialist Communications <ul><li>Key brands: </li></ul><ul><ul><li>OgilvyOne </li></ul></ul><ul><ul><li>Wunderman </li></ul></ul><ul><ul><li>G2 </li></ul></ul><ul><ul><li>rmg connect </li></ul></ul><ul><ul><li>Enterprise IG </li></ul></ul><ul><ul><li>Landor </li></ul></ul><ul><li>Key brands: </li></ul><ul><ul><li>Millward Brown </li></ul></ul><ul><ul><li>Research International </li></ul></ul><ul><ul><li>Lightspeed </li></ul></ul><ul><ul><li>Fitch </li></ul></ul><ul><ul><li>CommonHealth </li></ul></ul><ul><ul><li>Sudler & Hennessey </li></ul></ul><ul><ul><li>Grey Healthcare </li></ul></ul><ul><ul><li>Ogilvy Healthworld </li></ul></ul>
    7. 7. Blue Chip Client Base
    8. 8. Blue Chip Client Base Client Length of Relationship Advertising and Media Investment Management Information & Consultancy Public Relations & Public Affairs Branding, Identity & Specialist Communications
    9. 9. 2006 Overview By Discipline ¹ Headline PBIT/ margin: profit before finance income/ costs, taxation, goodwill and intangibles charges, investment gains, and share of exceptional gains of associates 14.1% 15.0% 11.1% 15.8% 14.5% Margin % 227 90 99 444 859 Headline PBIT 1 (£m) 27% 10% 15% 48% 100% Revenue % 1,612 596 893 2,807 5,908 Revenue (£m) Branding & Identity Healthcare & Specialist Communications Public Relations and Public Affairs Information, Insight and Consultancy Advertising, Media Investment Management WPP
    10. 10. 2006 Overview By Geography 1 Operating profit includes income from associates but excludes goodwill and impairment 14.5% 12.7% 11.4% 17.0% 14.5% Margin % 178 194 98 389 859 Headline PBIT 1 (£m) 21% 26% 14% 39% 100% Revenue % 1,228 1,533 856 2,291 5,908 Revenue (£m) Asia Pacific, Latin America, Africa & Middle East Continental Europe UK North America WPP
    11. 11. WPP has shown strong growth Revenue and Organic Growth Revenue £m Organic Growth +8% +8% +15% -3% -5.9% +.7% +4% +5.5% +5.4%
    12. 12. <ul><li>Headline PBIT excludes finance income/ costs, taxation, goodwill and intangibles charges, investment gains, and share of exceptional gains of associates . For 2004 onwards, Headline PBIT has been prepared under IFRS. 2003 and prior periods are in accordance with previous UK GAAP. </li></ul>WPP has shown strong growth PBIT 1 £’m PBIT 1 margin % Long-term IFRS target 19% 16.0% 2009 15.0% 2007 15.5% 2008 Objectives:
    13. 13. WPP Strategic Objectives
    14. 14. <ul><li>Globalisation /Americanisation /BRICs </li></ul><ul><li>The pace of technological change </li></ul><ul><li>Overcapacity, shortage of human capital </li></ul><ul><li>The Web </li></ul><ul><li>Retail concentration </li></ul>Key Priorities, Objectives and Strategy Long-Term Factors
    15. 15. <ul><li>Faster growing markets to be one third of total group </li></ul><ul><li>Marketing services to be two thirds of total group </li></ul><ul><li>Quantitative disciplines to be one half of total group </li></ul>Key Priorities, Objectives and Strategy
    16. 16. Key Priorities, Objectives and Strategy Faster Growing Markets To Be One Third of Total Group Today Including Associates¹ Tomorrow Today¹ ¹ Based on full year 2006 revenue ² Asia Pacific, Latin America, Africa & Middle East Europe N. America ROW ²
    17. 17. Key Priorities, Objectives and Strategy Revenue by Geography 1 Company reports for 2006 2 IPG revenue is analyst estimate 3 WPP sterling revenues converted @ $1.84= £1 based on the average for 2006 4 Havas and Publicis assumes $1=€0.796 based on the average for 2006. 5 Omnicom assumes “non Euro currency” Europe, ie Switzerland, Turkey, Norway, Denmark, Sweden and Eastern Europe are ca 4.5% of revenue and Canada is 1.5% of revenue. 6 IPG assumes Canada is ca 1.5% of revenue 7 Rest of World: Asia Pacific, Latin America, Africa & Middle East 6.2 16% 1.0 25% 59% IPG 2,6 5.5 18% 1.0 40% 42% Publicis 1,4 1.8 9% 0.2 54% 37% Havas 4 11.4 9% 1.0 35% 56% Omnicom 1,5 10.9 21% 2.3 40% 39% WPP 1,3 Total Revenue $’bn ROW 7 % ROW 7 $’bn Europe % N. America %
    18. 18. Key Priorities, Objectives and Strategy Marketing Services To Be Two Thirds of Total Group Tomorrow Marketing Services Advertising & Media Investment Management Today including associates¹ Today¹ ¹ Based on full year 2006 revenue
    19. 19. Source: 1 2006 Company Presentations 2 IPG revenue based on analysts estimates Key Priorities, Objectives and Strategy Revenue by Discipline 38% 2.4 62% 3.8 IPG 1,2 34% 1.9 66% 3.6 Publicis 1 44% 0.8 56% 1.0 Havas 1 57% 6.5 43% 4.9 OMC 1 52% 5.7 48% 5.2 WPP % Revenue $’bn % Revenue $’bn Marketing Services Advertising & Media
    20. 20. Key Priorities, Objectives and Strategy Quantitative Disciplines To Be One Half of Total Group Tomorrow Advertising, Media Investment Management & Other Marketing Services Information, Insight & Consultancy and Direct, Internet & Interactive Today including associates Today ¹ Based on full year 2006 revenue ¹ ¹
    21. 21. Financial Review
    22. 22. Current Financial Highlights <ul><li>Strong financial results for year ending 2006 with reported revenue up 10% and headline 1 profit before tax up 14.5% from 2005 </li></ul><ul><li>2006 was strong, to some extent reflecting the positive impact of events such as the winter Olympics in Turin, the FIFA World Cup in Germany and the mid-term congressionals in the United States </li></ul><ul><li>2006 marked continued client focus on top-line growth, as corporate profitability, margins and liquidity continued to improve significantly. Corporate profitability remains at historically high levels on both sides of the Atlantic. This resulted in continued high levels of new business activity </li></ul><ul><li>Operating profit improved due to cost strategy to increase variable staff costs as a proportion of total staff costs, thereby hedging against any unexpected downturns in revenue </li></ul><ul><li>Capital expenditure is mainly on information technology and property and is expected to remain approximately equal to the depreciation charge in the long term </li></ul><ul><li>In 2006, the Group continued to make small to medium-sized acquisitions and/or investments in high growth geographical or functional areas </li></ul><ul><li>1 Figures before goodwill and intangibles charges, fixed asset gains and writedowns and revaluation of financial instruments </li></ul>
    23. 23. Results for 2006 Financial Highlights - Unaudited 1 Figures before goodwill and intangibles charges, investment gains, share of exceptional gains of associates, and revaluation of financial instruments 2 Margin points 3 Net interest on debt 4 Headline PBIT: profit before finance income/ costs, taxation, goodwill and intangibles charges, investment gains, and share of exceptional gains of associates
    24. 24. Results for 2006 Cash Flow
    25. 25. Balance Sheet 2006 £m 2005 £m Year to 31 December
    26. 26. Results for 2006 Historic Average Debt/EBITDA Average debt/ EBITDA £ million
    27. 27. Debt Maturities (£m) $650m Yankee $1,600m Bank Revolver £450m Convertible € 650m Eurobond $100m Yankee £ Millions $150m Convertible € 600m Eurobond
    28. 28. Committed to Maintaining Current Ratings <ul><li>Rating: Jul - 98 Baa2 (stable) </li></ul><ul><li>Rating: Mar – 07 Baa2 (positive) </li></ul>Moody’s S&P “ WPP's Baa2 long-term rating is based on the group's world-wide leadership in advertising, communications and marketing services […]. WPP's strategy has been consistent and well defined over a number of years. […] We would expect WPP to continue to perform in line with or above the industry average in terms of growth. ” “ The ratings […] reflect [WPP’s] leading positions in advertising, market research, and public relations services, combined with broad geographical, functional, and client diversification. The ratings are further supported by the group's moderate financial policy, sustainable profitability, and the cash-generative nature of the professional services business.” <ul><li>Rating: Jun - 98 BBB+ (stable) </li></ul><ul><li>Rating: Mar - 07 BBB+ (positive) </li></ul>15 March 2007 13 November 2006 “ Moody's […] changed the outlook for WPP […] to positive […due to] strong operating performance in 2006, a further incremental improvement in the flexibility of the company's cost base and stronger debt protection measurements […] Moody's expect[s] that WPP will remain on a positive operating trajectory with continued visible organic growth and commensurate profit development.” 8 November 2006 “ Standard & Poor's […] revised its outlook on [...] WPP […] to positive from stable, reflecting progressive improvement in profitability and debt protection metrics. Subject to continuity in the group's financial policy, current operating performance trends could lead to a one-notch rating upgrade in the medium term.” 13 March 2007
    29. 29. www.wpp.com www.wppinvestor.com