Fourth year of growth for WPP

Buoyed by the fourth straight year of improving profits, shares in the advertising giant WPP climbed within 50p of activating a controversial performance bonus for its chief executive, Martin Sorrell, writes Mathew Horsman.

Pre-tax profits soared 33 per cent to pounds 113.7m, on turnover up 9 per cent to pounds 6.5bn. The shares rose 5p to 178p, marking the continuation of a rally from the 160p level early this year. If the shares reach 230p within five years - a virtual certainty, according to media analysts - Mr Sorrell will receive the first tranche of a performance-related package worth as much as pounds 25m.

Profit margins improved to 12.1 per cent from 10.4 per cent a year earlier, and Mr Sorrell expects a further one percentage point improvement in 1996.

North America continued to dominate group business, representing just over 38 per cent of operating profit. Media advertising, including billings by group agencies J Walter Thompson and Ogilvy & Mather, accounted for well over half of total revenues, followed by market research.

Operating losses at Hill & Knowlton, the group's struggling public relations arm, fell substantially.

Mr Sorrell said there was still "a significant profit opportunity by matching the operating margins of the best-performing competition."

Companies such as Interpublic and Omnicom, both US-based, boast margins of at least 16 per cent, four percentage pointa above WPP .