WPP benefits from busy year

Advertising giant WPP today reported a 16% hike in profits but said worries over the US economy were clouding its outlook.

Sporting events including the Athens Olympics and the Euro 2004 football tournament helped WPP generate half-year revenues in excess of £2bn (€2.96bn) for the first time.

The group, which owns agencies including Ogilvy & Mather and J Walter Thompson, also benefited from a market recovery as it posted profits of £234.7m (€347.5m) for the six months to June 30.

Turnover was ahead 13% to £2.03bn (€3bn) at constant exchange rates, with UK revenues rising 12% in spite of a tough media market.

The advertising group expected global activity this year to “once again match, or surpass, the levels…seen in the internet-driven boom year of 2000”.

WPP is one of the world’s biggest advertising and public relations firms, with more than 72,000 staff and 1,700 offices.

It has bases in 104 countries and includes American Express, Ford, IBM and Unilever among its clients.

Although WPP said its prospects for higher revenues and margins in 2005 were good, it also highlighted concerns about the strength of the US economy after the presidential election in November.

“Whoever is elected will have to deal with a substantial fiscal deficit, a weak dollar and risks of inflation, not aided by high oil prices and commodity prices,” WPP said.

Companies were finding it difficult to meet sales targets or raise revenues at a time of low inflation, it added.

In addition, higher interest rates could slow the US economy as consumers struggle with a mounting debt burden and rapidly increasing house prices.

But the advertising giant drew comfort from recent results from technology companies, which indicated higher spending on capital projects.

WPP added that corporate profitability was strong and growing “at levels not seen since 1984”.

North America, where WPP generates 40% of its business, grew revenues for the seventh quarter in a row and profits rose to £134.1m (€198.6m) from £123.8m (€183.4m) a year ago.

WPP offered no clues today as to whether it is ready to mount a bid for US-based Grey Global – the seventh-biggest marketing services company in the world.

Media reports said WPP was conducting due diligence in advance of a potential offer, which could be in the region of $1.5bn (€1.2bn).