Britain's WPP Plc, the world's second-biggest advertising and marketing company, posted a 6 percent rise in like-for-like first-half revenue and raised its margin target amid strong growth in the sector.
WPP, home to ad agencies such as JWT and blue chip clients like Procter & Gamble, said its new operating margin target for 2005 was 13.7 percent, up from 13.2 percent previously.
The company said pretax profit before goodwill amortisation and other items rose 32 percent to 255 million pounds ($459 million) in the six months to end-June. Profits were at the lower end of forecasts, but analysts said the differences were mostly due to the company's transition to IFRS accounting rules.
Brokerage Numis raised its earnings per share forecast for 2005 to 33.1 pence from 31.8 pence, and for 2006 to 38.4 pence from 37 pence "in light of the increased margin guidance".
The broker rates WPP a "buy", given the prospect of a boost next year from the Winter Olympics, soccer's World Cup and US Congressional elections.
WPP said first-half revenues rose 22 percent to 2.5 billion pounds, boosted by the acquisition of US group Grey Global, new business from Samsung and HSBC, and signs of life in the previously moribund Western European ad sector.
"The second quarter was stronger in France and Germany," Chief Executive Martin Sorrell told Reuters. "The UK is not as stabilised or as strong."
The company has targeted organic growth, which excludes acquisitions and currency fluctuations, of 3 to 4 percent for the full year, but analysts think that figure could be low, given the pace of first-half growth.
At 0850 GMT WPP shares, which had performed in line with European media peers over the past 12 months, were down 0.1 percent at 591 pence, valuing the business at 7.4 billion pounds.
Sorrell, closely watched for his pronouncements on trends in the industry, said much of the traditional model of advertising was under pressure as developments like the Internet and slowing population growth "result in limited pricing power". However, WPP noted "corporate profitability remains strong on both sides of the Atlantic and, as a result, advertising and marketing services spending does too, if anything continuing to strengthen."
Sorrell has been at the forefront of those calling for a diversified model that draws more business from so-called "below-the-line" marketing activity like direct mail and interactive ads, and from fast-growing markets outside of North America and Western Europe.
"We are finding that our industry is becoming increasingly more and more two-paced. Slow growth in traditional media, such as network television, newspapers and magazines, more rapid growth in new media, such as direct, Internet and interactive, driven by new technology," WPP said.