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WPP powers on to 36% increase in 2005 profits

LONDON – WPP has grown its full-year pre-tax profits by 36% to £592m, with Grey's strong contribution since its integration last March boosting the group in what it called a 'surprisingly strong' year.

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Profits growth outpaced revenue growth, which was up 25% to £5.37bn, again due to the £801m acquisition of Grey. Organic revenue growth was 5.5%.

New business worth £2.8bn was won during 2005, with media operations leading the way.

"Media investment management continues to show the strongest growth of all our communications services sectors, along with direct, internet and interactive and healthcare communications," the group stated.

In terms of performance by region, the UK lagged with organic growth of 1.9%, compared with Europe's 2.9%, North America's 5.8% and the rest of the world's 11.9%.

Operating margin increased to a record 14% from 13%, beating WPP's own target of 13.7%. The group's previous record margin was 14.5% in 2000 but this was under previous accounting rules.

WPP, headed by group chief executive Sir Martin Sorrell, announced its next targets for operating margin performance as 14.5% in 2006 and 15% in 2007.

It alluded briefly to the ongoing situation in Italy, where it is involved in a legal battle and fraud investigation against Marco Benatti, the country manager sacked in January. Without revealing any new information, it said the group's financial results are not expected to be significantly affected.

The board stated that the economy had been stronger than expected in 2005 while prospects for the current year "look OK". It expected short-term client expenditure growth to remain in low- to medium-single digit territory, given the low inflationary environment, concentrating distribution and consequent lack of pricing power.

It described long-term business prospects as "very favourable" with significant opportunities arising from the growth of developing economies and factors such as new technologies and media.

"Advertising and marketing services expenditure as a proportion of gross national products should resume its growth and bust through the cyclical high established in 2000."

WPP's profits performance impressed analysts and its shares started the day up 5.25% to 651p.

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