pounds 25m Sorrell share option jackpot within reach at WPP

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The Independent Online
Martin Sorrell, head of WPP and potentially the highest paid advertising executive in Britain, last night stood on the verge of triggering the second tranche of a controversial share incentive scheme worth up to pounds 25m.

The first target, 198p, was reached last month, and must hold for 60 consecutive days before Mr Sorrell receives his initial block of 1.1million shares. A second lot of 1.6 million shares will be awarded if the shares reach and remain above 230p, again for 60 days. Thereafter, further shares would be awarded at 265p and 304p.

The shares rose 7p yesterday to 221p, just 9p below the second trigger, after the company announced sharply higher interim profits of pounds 68m and exceeded operating margin targets set last year.

"These were very good results indeed," said one leading analyst, who revised his full-year expectations to above pounds 150m.

Mr Sorrell said a lower tax charge of 35 per cent, against last year's 41 per cent, helped fuel the rise. "We are now more in line with the tax charges of most companies with our international scope," he said.

Revenues were up by 10 per cent, with net new business totalling pounds 587m in the half. "We are particularly pleased that our revenues have increased by 10 per cent while our staff costs were up only 3 per cent," Mr Sorrell said. "That means our productivity is improving."

Operating margins were 10.2 per cent, and the company hopes to see this rise to 11 per cent by the end of the year. "I am still looking at our main competitors, whose margins are higher, and know we must do better," he said.

Both the main international agencies, Ogilvy & Mather and J Walter Thomson, reported strong revenue growth in the quarter, helped by new business from large clients such as IBM, Kodak and Kimberley Clark.

Hill & Knowlton, the public relations company, returned to the black, following several quarters of disappointing performance. Mr Sorrell said the company ought to see its margins improve markedly from the current 3 per cent.

Looking ahead, Mr Sorrell said prospects were good for the rest of 1996 but that he continued to have doubts about 1997, after the US presidential election and in the run-up to the general election in the UK. WPP stood to gain from the trend towards the awarding of advertising accounts to big firms at the expense of the middle market.

Investment Column, page 18

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