WPP shrugs off Italian troubles with one-third profits rise

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Amid swirling rumours about the governance of WPP's subsidiaries around the world and a contentious fraud inquiry at the Italian branch, the group announced underlying profits of £669m - up one-third.

The final dividend was raised 20 per cent to 6.34p, with a promise of more to come in the future from a strong cash pile.

Sir Martin was dismissive of suggestions that his battle with Marco Benatti, the former head of the Milan division, is anything other than a question of business.

Mr Benatti has tried to paint the battle as a personal vendetta, claiming Sir Martin's decision to sack him was "brutal and unjustified behaviour".

The WPP chief executive said yesterday: "This is not personal. We found things we didn't like. Mr Benatti took the view that I would be a practical businessman and I wouldn't pursue the things I had found. He made an error of judgement."

Sir Martin thinks that the cost of the investigations into the Italian arm will not be significant, but argues it would be wrong to simply settle the charges and move on.

He said of his former colleague: "He has used the press to embarrass us. Several situations suggest that with Italian managers the natural tendency is to sweep these things under the carpet."

The allegations centre on double-dealing by Mr Benatti and certain "irregular personal expenses" - claims that the Italian denies.

Sales rose last year following the WPP takeover of Grey Global, a deal that made it the second biggest advertising group in the world and brought in large clients such as Procter & Gamble. Revenues were up 25 per cent to £5.4bn.

John Barrett, an analyst at Williams de Broë, said the figures "set the scene for estimates to go higher for 2006. It's looking quite good at the moment."

WPP expects to grow at up to 5 per cent this year, beating competitors in the process.

Advertising spending is likely to soar in 2006 due to the football World Cup and the US congressional elections, a boon to media enterprises.

WPP shares leapt yesterday as the City digested the figures, closing up 49p at 668p, at which price the company is valued at £8bn.

Sir Martin believes the UK economy is in danger of slowing, advocating a cut in interest rates to improve consumer spending.