WPP mid-term profits rise 16%

Britain's WPP Group, the world's second-largest advertising company, said yesterday its first-half profits climbed nearly 16 per cent as growth in Asia and the United States counterbalanced sluggish European markets.

The company owns several media businesses in Ireland: Wilson Hartnell PR, DDFH&B, Ogilvy & Mather and the media buying/planning agency Mindshare.

Chief executive Mr Martin Sorrell said his company is still conducting due diligence on Grey Global as it considers making a bid for the third-largest US advertising company.

"We continue to noodle," Mr Sorrell said.

Dealers said a combination of uncertainty about a possible takeover of Grey and cautious comments about weakness in the US economy weighed on the stock, however. Its shares ended down 6.5p to 488p.

"From the tone of the conversation, they're very interested in acquiring Grey, and that entails a bit of acquisition risk," said Numis analyst Mr Richard Hitchcock.

At an analyst meeting Mr Sorrell put forward the case for why Grey is a good fit with WPP,including the opportunity to win blue-chip clients like Procter & Gamble, the world's biggest advertiser.

Mr Sorrell said that acquiring Grey would not be a setback for his goal of making WPP less reliant on the US and traditional advertising.

"It doesn't move the needle at all," he said. "Grey, in the context of WPP, is not enormous."

Other potential bidders for Grey include France's Havas and private equity firms Providence Equity Partners, Blackstone Group and Hellman & Friedman.

By the numbers WPP, whose agencies include Young & Rubicam, Ogilvy & Mather and J Walter Thompson, said pre-tax profit excluding goodwill and other items for the six months to June 30th was £234.7 million (€346.8 million), at the upper end of analyst estimates.

Revenue climbed 6 per cent to £2.03 billion. US-based Omnicom Group, the world's largest advertising firm, reported similar growth in profits and revenue in its second-quarter results last month, suggesting that the advertising recovery is gaining steam.

WPP said it is on track to hit its operating margin target of 13.8 per cent in 2004, and set targets of 14.5 per cent in 2005 and 15 per cent in 2006.