UK advertising market steadies, says WPP

The world's second-largest advertising company, WPP Group, revealed yesterday that a "mucky" UK advertising market had steadied in the first half of this year but continues to lag the rest of Europe.

The owner of the JWT, Ogilvy & Mather and Young & Rubicam agencies underlined that growth within the media industry here is increasingly polarising as traditional media struggle while the internet runs ahead. Sir Martin Sorrell, WPP's chief executive, said: "If not actually in decline, then it [traditional media] is certainly flattening out. The growth in the market is in the internet, but that too will have to stand the test of time."

His comments echoed a recent report from the UK communications regulator, Ofcom, which showed that annual revenues from online advertising soared from £170m in 2001 to £1.3bn last year.

Newspapers and television companies have been hard hit, but Sir Martin remained sanguine about prospects for the troubled broadcaster ITV, both a WPP client and a destination for commercials for many others.

ITV's long-standing chief executive, Charles Allen, recently confirmed that he is to stand down in September. A search is under way for his replacement. "Action has been taken," Sir Martin said. "Our clients are of the view that there should be a considerable investment in the product. Whoever comes in [to replace Mr Allen] will find little resistance from major shareholders. The financial results will suffer in the short term. But there is life in the old dog yet."

Meanwhile, WPP unveiled a 30 per cent improvement in profits before tax in the first half of this year, to £287m. Like-for-like revenues were 5 per cent ahead.

Spending on advertising rose sharply in Asia and central and eastern Europe, and concerns about a slowdown in the US have as yet proved unfounded.

Sir Martin said that provided the US economy held up he was looking forward to another good year in 2007, buoyed by the build-up to the Beijing Olympics and heavy spending in the run-up to the US presidential elections.

About WPP's slowest sales region, the UK, he said: "I think it will continue to be bit mucky, but next year may be a bit better."

The group reiterated that it expected to outperform growth across the wider industry of 4 per cent this year.

City experts applauded WPP's interim performance, which was a touch better than expected after a particularly good June.

Lorna Tilbian, media analyst at Numis Securities, emphasised that WPP is better placed than many rivals to cope with technological change and exploit opportunities in emerging markets such as Brazil, India and China.

WPP will pay an interim dividend of 3.6p, 20 per cent higher than last year. Its shares advanced 13.5p to 652p.