Profits climb at WPP

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The Independent Online
WPP, the advertising and marketing services company, pleased the market with interim figures at the top end of analysts' estimates, sending shares up 3.5p to 143.5p yesterday.

Driven by higher revenues and improving profit margins, pre-tax profits rose to pounds 48.5m from pounds 35.2m in the six months to June, while revenues were up to pounds 739.4m. from pounds 690m.

Profit margins rose to 8.3 per cent in the period, ahead of last year's 7.3 per cent, leading analysts to expect an improvement to perhaps 10 per cent next year, in line with management targets.

Commenting on the figures, Martin Sorrell, group chief executive, said: "We expect to make further progress for the balance of 1995, and see no reason why 1996 won't be a reasonably good year."

Revenue growth has quickened steadily since last year, with a rise of 4 per cent in the first half of 1994 and 6 per cent in the second half.

Mr Sorrell, who earlier this year was awarded a controversial pounds 28m performance-related pay package following a shareholder vote, said he expected the US and the UK, the company's two biggest markets, to "stimulate the economy in 1996", in advance of elections in both countries.

In the short term, he argued, that would be good for WPP's main businesses, particularly media advertising, which accounts for 55 per cent of revenues and 75 per cent of operating profits. He stressed, however, that any tightening after 1996 could have a detrimental effect on advertising volumes.

Revenues from media advertising in the US, representing about 40 per cent of the business, were up 6 per cent, Mr Sorrell said. The UK market continued to outperform other main markets, with revenues up by 12 per cent.

The two main ad agencies, J Walter Thompson and Ogilvy & Mather, saw their costs decline further.