Sorrell edges nearer 18m bonus as WPP profits soar

Record year-end figures from WPP Group have put chief executive Martin Sorrell on course for a further tranche of his 18m incentive bonus.

Pre-tax profits at 153.3m were up 35 per cent on last year’s 113.7m – comfortably ahead of analysts’ expectations. Revenues rose nine per cent to 1.69bn and earnings per share (fully diluted) a hefty 46 per cent to 13.3p (9.1p) in the year to December 31.

A key indicator of the group’s performance are operating margins, which measure operating profits as a percentage of revenue. These widened 1.2 per cent to 10.8 per cent, above the one per cent forecast. However, WPP still trails benchmark agency groups in the US, such as Interpublic Group and Omnicom, whose comparable figures range between 13 and 15 per cent.

WPP experienced strong growth in Asia Pacific and Latin America. Combined revenues for its subsidiaries J Walter Thompson Company and Ogilvy & Mather Worldwide rose 7.2 per cent. But growth in market research (10.6 per cent), and specialist communications such as direct marketing, design and sales promotion (10.9 per cent), was stronger.

For Sorrell to qualify for his full bonus, WPP shares must eventually exceed 300p. Currently they are trading at slightly under 270p. WPP is organising a partial share buy-back, which may have the effect of stiffening the share price.

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