Category: Insights

Marginal organic growth in Dentsu’s H2 results masks a business that may just be regaining some momentum, suggests Green Square’s Barry Dudley as he looks at the Japanese holding company’s latest numbers. At first sight, an organic growth in revenue of 0.2% in Q2 seems an odd thing to lead your results announcement with. Or maintaining the guidance for the full year at a mere 1%. But for Dentsu, it’s a pretty big moment because in all of the previous five quarters, it had shrunk – by 1.6% in Q1 2023, 4.7% in Q2, 6.0% in Q3, 6.6% in Q4 and 3.7% in Q1 2024. Strength in the home market of Japan sits behind this, in particular “continued recovery in internet advertising,” so H1 organic growth of 2.1% was healthy – Japan represents 40% of net revenue. But all other geographies declined across H1: Americas down 5.1%, EMEA down 0.9% and APAC down 6.6%. The Americas “has continued its recovery, recording a number of new client wins” and it is hoped there will be a return to growth in H2 – encouraging for Dentsu’s second biggest market. EMEA also seems to be turning a corner, with the 0.9% H1 decline consisting of a 9.4% drop in Q1 but a 7.8% organic growth in Q2, with “stronger than expected Media performance in some local markets” being part of the story here. APAC would appear to be the region that still needs fixing, with pretty scary declines in all of the last six quarters of between 6.2% and 9.1%. The focus here is on “long term recovery,” but perhaps there’s a shorter-term in organic strategy (acquisitions) to reset the trajectory. There is reference to exporting its Business Transformation offering out of Japan into other markets and “expanding globally” Dentsu Lab, “the group’s creativity and innovation proposition.” For me, it’s the latter that will likely fuel the future. Being “positioned at the convergence of marketing, technology and consulting,” it is taking on the consulting and tech giants, not just the other marketing groups (and independents). What will set Dentsu apart is how “creativity and innovation” is applied within all this. And what of the share price given the stock market turmoil in recent weeks – closing at 3,870¥ today after the results were announced, this is almost exactly where things were at on the close of business on Friday, August 2 (3,872¥) before the market meltdown the following Monday. There’ll be more twists and turns to come, I’m sure, but for the moment, Dentsu seems to be gathering some positive momentum. Read more

The latest financial updates again show the full range of fortunes being experienced across the major marketing groups, as Green Square’s Barry Dudley explains. On today’s WPP results call, Mark Read, the CEO, used words such as “satisfactory” and “firm.” And along with CFO Joanne Wilson, the term “headwinds” cropped up pretty often. So, it was no surprise to hear that LFL (like-for-like, another term for organic) revenues less pass-through costs were down 1% for H2 and down 0.5% in Q2. One of the biggest factors behind this was a 24.2% decline in China in Q2 – a stark contrast to Publicis’s announcement a couple of weeks ago, where China was its highest growth geography at 10.5%. The “rest of the world” and the UK were also down by 5.3% and 2.2%, respectively, but all other geographies were up: North America 2.0%, Western Continental Europe 0.3% and India a strong 9.1%. We saw some rather big global stock market drops on Monday, with Japan down 12% off the back of a US slowdown/talk of recession. While things seem to have stabilized, there is a good chance that this will be a factor for all businesses in H2 2024. All of this has led to a downward revision in WPP’s full-year guidance of -1.0% to 0% growth in LFL revenues less pass-through costs. Read talked through WPP’s strategic progress. Unsurprisingly, AI came first alongside WPP Open – it was refreshing to hear how they are using AI in “how consumers experience work,” not just how it may save costs operationally or make production more efficient (which were there, too). Seeing an AI-generated Jose Mourinho in an ad was a welcome break in the call. Next up was the focus on progress within VML, Burson and GroupM, which now represent a whopping 70% of WPP’s sales. Along with the sale of FGS Global – for £604m cash after tax – the streamlining of the group is continuing apace. Then came the awards, in particular WPP’s successes at Cannes Lions this year, which were impressive. So, how does all this stack up with Stagwell, the self-styled “challenger holding company,” whose results were announced late last week? Well, they were much more at the bullish end of the spectrum. Organic net revenue growth – one of the best indicators of the trajectory of a business – was a very modest 1.2% in Q2. But this is off the back of 8% in Q1 and, most importantly, Stagwell reaffirmed its guidance on organic net revenue growth for the year of 5% to 7%. So, it is hoping for a strong H2. The CEO, Mark Penn, referenced three things that will hopefully fuel this – a “flood of new business wins at the end of Q2,” which included General Motors work for 72andSunny and Anomaly, “media margin in the back end [of the year]” and strong performance expected in Advocacy. Penn’s demeanor on the earnings call was very much one of someone presiding over a business that has momentum. Biden stepping out of the presidential race has reignited the Democratic party’s prospects, which Penn believes will flow through into what is already very strong growth in Stagwell’s Advocacy segment – 42% year on year. And new business, in general, seems to have moved to another level: “Average size of new business wins increased 65% YoY; 57% increase in deals exceeding $1m.” This certainly seems to be backing the “challenger holding company” mantra. Read more

Holding company results have been coming thick and fast – some good, most not so. Green Square’s Barry Dudley analyzes the latest results from IPG and Havas. After some strong results from Publicis, which included the guidance for full-year organic revenue growth being lifted from 4-5% up to 5-6%, we saw 5.2% organic growth in the second quarter from Omnicom. However, the latest round of financial results revealed last week by IPG and Havas paint a different picture. Two words from the first sentence of the press release sum up IPG’s performance – “solid” and “moderate.” With 1.7% organic growth for the quarter and guidance of 1% for the year, I’d argue this is a group that’s simply treading water. There was talk of initiatives in AI, strong retail media performance and broadening their offer to solve more of the challenges that clients face, as we might expect. But there were two problem areas: first, the “tech and telecom sector continued to weigh on growth,” in particular the “loss of a large AOR assignment with a telco client late last year” that is continuing to hurt it, and second, “in keeping with recent quarters…underperformance at our digital specialist agencies.” Good news for us at Green Square was that M&A is still on the agenda as a more rapid route to increasing capabilities and growth overall. Next came the Vivendi group results, of which Havas is just one piece. Vivendi’s organic revenue growth for H1 was 5.8%, just ahead of Publicis and Omnicom. Canal+ and Lagardere make up over 80% of Vivendi’s revenues, so the fact that Havas delivered only 0.3% organic growth gets somewhat lost. For Q2, Havas actually had an organic decline of 2.3%, which pretty much wiped out its Q1 growth. Much like IPG, this was mainly down to a “partial loss of a big client in the US,” which left that geography down 6.4% for H1. The impact of this loss will also be felt in Q3, but the hope is for a return to organic growth in Q4 or maybe in 2025. This leaves a lot for the acquisitions to cover off to maintain overall growth. It was announced earlier this week that another step had been taken towards separately listing Havas, which looks set to be on the Euronext Exchange in Amsterdam. There will be no hiding within Vivendi’s numbers once this has happened. Fascinatingly, Canal+ looks to be heading for a listing on the London Stock Exchange. It will be interesting to see how the Converged strategy, which was announced in June, unfolds and it was again positive to see reference to future M&A: “Virtually zero net debt [in Havas] to seize investment opportunities in the future.” This all made me think back to Nigel Bogle’s infamous statement: “I’m only ever three phone calls away from disaster.” This was said when BBH was an independent agency and losing a client (or three!) could potentially impact the viability of a business. IPG and Havas clearly have scale and diversity of revenues that protect them from three phone calls becoming a “disaster,” but it would appear that just one phone call can create a pretty big bump. Read more