The advertising giant WPP Group has reported a 29% rise in pre-tax profits for 2001.

The result, which was fuelled by its acquisition of the media buying group Tempus last year, was at the high end of analysts' predictions.

But the group's outlook for the near future is more gloomy.

WPP predicts that companies will not increase spending on advertising and marketing in 2002.

"We don't see any green shoots or blue sky or room for optimism yet," said chief executive Sir Martin Sorrell.

Most analysts were even more downbeat: They predicted such spending to be reduced.

WPP made �490m in profits before tax, goodwill, investment gains and write-downs in 2001 while its turnover rose 35% to �4bn.

However, when the acquisition of Tempus is excluded, its like-for-like turnover fell 3%, sharper than analysts had predicted.

Higher margins

WPP aims to raise its profit margins in the months to come.

Last year's cost cutting which included a 5,000 cut in its global workforce to 51,000 should feed into this year's financial performance, Sir Martin said.

In 2001, WPP's operating margin was 14%. The group aims to reach 15% in 2002 and 15.5% in 2003.

Its eventual target is 20%, the group said.

This could prove difficult given the lack of growth in companies' advertising and marketing budgets, Credit Agricole Indosuez Cheuvreux said in a research note.

WPP rose 2p to 679p by 0845 GMT after an investment bank upgraded it from 'hold' to 'buy', but by 0945 GMT the stock had slipped back to trade 1p down at 676p.