Emerging markets boost WPP profits

WPP's investments in the emerging economic superpowers of India and China and in internet-related business were key factors in the group's 14.5 per cent profits rise last year.

Sir Martin Sorrell's marketing communications group this week exceeded analysts' expectations by announcing pre-tax profits of £766.3 million for 2006.

And the company remains bullish about its prospects for this year, as the upcoming US presidential election and the Beijing Olympics boost adspend.

WPP, which expects China to become its third-largest market by the time the Olympics take place in 2008, has been pursuing a policy of snapping up modest-sized operations in China and India.

At the end of last year, its Ogilvy & Mather subsidiary acquired 70 per cent of Beijing Century Harmony Advertising, a leading Chinese internet agency. At the same time, it took a majority stake in Ray & Keshavan Design Associates, an Indian brand and design specialist.

Now such initiatives seem to be paying off, with WPP reporting like-for-like growth rates in China and India of 23 per cent and 19 per cent respectively. This contrasts with an ongoing sluggish performance in Western Europe, although Sorrell said economic growth in Germany and more stability in France and Italy had improved prospects.

Meanwhile, the internet has become an increasingly important profits driver for the group. Last year, it accounted for almost £510 million - or more than 9 per cent - of its worldwide revenue. This exceeds the online industry's share of worldwide adspend, which is estimated at between 6 per cent and 7 per cent.