Warc Blog

Crisis confused holding groups

6 January 2011
LONDON: Many major agency holding groups failed to respond adequately to the challenges of the downturn, resulting in falling revenues and margins, a new global study has argued.

Based on analysis of the most recent accounts published by the 27 largest publicly-listed marketing services firms around the world, consultancy Fintellect found their collective sales fell 5.2%, to $50.4bn (€38.3bn; £32.6bn), in 2009.

Two-thirds of the featured corporations saw post-tax profits contract or registered greater losses than during the previous 12 months.

Operating profit margins also slipped from 13.3% to 11.4% year-on-year, primarily as 77% of the organisations monitored did not reduce expenditure on staff in line with decreasing returns.

WPP Group enjoyed a 13.3% uptick in sales, which reached $12.1bn.

This means the organisation has overtaken Omnicom as the biggest advertising conglomerate, after its rival delivered a 12.3% drop to $11.7bn.

Publicis Groupe witnessed a 3.8% slide to $6.4bn, and Interpublic Group endured a 13.4% slump, to $6.2bn.

While Japan's Dentsu came in at just half the size of Publicis and IPG in total revenue terms – on $3.2bn – it was considerably more profitable than these two competitors.

Indeed, Dentsu's post-tax profit matched that of Havas, Interpublic Group and Aegis put together, according to Fintellect's calculations.

One characteristic of Dentsu, and its Japanese compatriots Hakuhodo and Asatsu-DK, was an unwillingness to borrow money.

The last two members of this trio recorded zero net costs in this area, even though the amount Hakuhodo drew from its client roster tumbled 6.8% to $1.5bn, and Asatsu-DK was off 15.8% to $453m.

"Dentsu's modest finance costs of $2.2m paled into insignificance alongside the $237m paid out in finance costs at WPP, the $121m paid by Interpublic and the $101m paid by Omnicom," said Bob Willott, of Fintellect.

"At times like these we should probably applaud the fact that 30% of the companies surveyed incurred no finance costs at all, suggesting that they had not been relying on borrowed money to any material extent in the period."

Tight resource management proved particularly important for smaller enterprises, potentially more vulnerable to fiscal shocks.

"Over half of the operating profits earned by Australia's Photon Group and Canada's MDC Partners were expended on interest, leaving limited scope to accommodate any further economic woes," the report said.

Elsewhere, the Mitchell Communication Group – active in the Australian media, digital and research sectors – was one of two additional firms enjoying meaningful revenue growth, up 9% to $94m in 2009.

The other was UK-based Chime Communications, the owner of VCCP, which delivered a 9.8% leap to $187m.

Data sourced from Fintellect; additional content by Warc staff

 
Envelope
EMAIL UPDATES

Sign up to Warc News – free daily bulletins on brand and market strategy, digital media and innovation


 

News content feedPrint