Sorrell still cautious on US after record year for WPP

After three years of "unrelenting economic battering", advertising and marketing spend recovered in 2004 to deliver an improved performance at WPP, the world's leading advertising and marketing services group, according to the company's chief executive, Sir Martin Sorrell.

Announcing annual results for the 12 months to 31 December yesterday, Sir Martin said revenues rose 11 per cent at constant currency rates to £4.3bn, while pre-tax profits increased more than 30 per cent to £456.5m. The company's total dividend for the year was up by 20 per cent, to 7.78p a share.

The company, which includes the Ogilvy & Mather and Grey Global advertising agencies, benefited from higher spend resulting from the US presidential election and the Athens Olympics. Sir Martin predicted like-for-like revenue growth of 3 to 4 per cent in 2005, although January had delivered a 6 per cent like-for-like increase. WPP's long-term goal is to improve operating margins from14 per cent to 20 per cent.

Part of the improvement in spending, and the reason for a more buoyant outlook, was a switch in emphasis among companies to spending on innovation and branding rather than conserving cash, cutting costs and paying down debt. "The most recession-proof sectors we saw were government spending, oil and energy, pharmaceuticals and retail and packaged goods," Sir Martin said.

"Last year we started to see a return to spending from those sectors that were hurt most by the downturn: telecoms, information technology, financial services and the media."

He warned that although global economic conditions are likely to improve, America's twin deficits, commodity price inflation and the weak dollar may combine to destabilise the US economy. But Sir Martin added: "Western Europe looks set to continue the improvement seen in the second half of 2004."