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WPP 'climbing out of bath' but first-half profits fall 7.8%

LONDON - WPP Group has said it is climbing out of the 'bath' of the advertising recession, despite a drop in pre-tax profits of 7.8% over the first half of the year to £234.1m.

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Revenues at the group, owner of the advertising agencies J Walter Thompson and Ogilvy & Mather, were down by 2% to £1.91bn in its interim results for the six months to June 30.

But WPP had good news for investors by raising its dividend by 20% to 2.08p a share, and also cheered the market by reporting growth in some markets and an optimistic outlook for 2004.

WPP's results are of interest not only to the marketing industry but also to the wider business community, with advertising seen as a barometer of general economic wellbeing.

The City will be pleased, therefore, that WPP chief executive Sir Martin Sorrell has said that the group is "starting to climb out of the bath" -- a reference to one of his many colourful descriptions of economic growth appearing as a bath-shaped graph.

Once again, next year's Olympic Games, US Presidential election and the European Football Championships are cited as triggers for growth in the industry. WPP also said that growth in US government spending is greater at the moment than at any time since during the Vietnam War in 1967.

The only region to show a decline in revenue was the UK, down by 1.8% for the period. Constant-currency growth in US revenues was 2.2%, while continental European revenues grew by 2.7%.

Discipline-wise, advertising and media revenues, which account for 46.2% of WPP's income, grew by 3.7%. Public relations and public affairs was the hardest hit sector, with a decline of 2.9% in revenues.

WPP said that media revenue began to improve in October 2002, and then significantly in April 2003, primarily driven by the strong US upfront media-buying season.

Shares in the company were trading down 8p at 562p in early morning trading, a fall of 1.4%.

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