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

The advertising giant reported better-than-expected profits and revenues, reflecting a trend of increasing brand spend – despite high inflation – across the industry. Omnicom Group, the world’s second-largest advertising holding company (behind French titan Publicis), reported its second-quarter financial results Tuesday evening after trading closed. The results beat Wall Street estimates on both profit and revenue. Performance was primarily driven by growth in the company’s advertising and media practice, as brands ramped up spending ahead of the US presidential election and the Paris Olympics, which will commence July 26.

Topline highlights

Omnicom achieved a 5.2% increase in organic revenue, adding $188.3m compared with the same period last year. This contributed to a total revenue lift of $243.9m, or 6.8%, bringing the quarterly total to nearly $3.9bn, slightly above analysts’ estimates of $3.82bn, according to data from the London Stock Exchange Group (LSEG), a leading financial markets research firm. Earnings per share for the quarter were $1.95, exceeding the consensus estimate of $1.93 and reflecting a 7.7% year-over-year increase.

Key growth drivers

Omnicom’s positive results were underpinned by contributions across various regions and disciplines. Regionally, the US led with a 6.3% organic growth rate, followed by 6.9% in the UK, 4.5% in Europe, 24.5% in Latin America, and 8.0% in the Middle East & Africa. However, slight declines were noted in the Asia Pacific (0.1%) and North American territories outside the US (8.3%). In terms of business segments, the company’s advertising and media division – its largest division in terms of revenue – saw a 7.8% rise in organic growth. The increase was driven largely by the media side of the business, with additional contributions from creative agencies. Meanwhile, Omnicom’s experiential marketing practice grew 17.6%, thanks in large part to work tied to the upcoming Summer Olympic Games in Paris. Precision marketing posted a modest 1.4% increase, with Flywheel Digital’s strong performance offsetting the loss of one client. A new contract with General Motors – which shook up its CRM and creative agencies roster last month – is expected to further bolster Omnicom’s advertising and media performance in the second half of the year. ”The most challenged discipline for the second quarter in a row was the curiously named branding and retail commerce [segment],” points out Barry Dudley, partner at financial advisory firm Green Square and a marketing services industry veteran. The division recorded a 3.8% dip – the same decline it saw in Q1. ”It would seem that the online retail commerce bubble off the back of Covid has worked its way through, while consumer appetite for experiences – physical experiences in particular – have grown,” Dudley observes, though he says this trend is ”not really new” at this point.

Strategic acquisitions and investments

The $93m increase in acquisition revenue was primarily attributed to the acquisition of Flywheel Digital, highlighting Omnicom’s strategic expansion efforts. The holdco has also made strides in consolidating production capabilities with the June launch of Omnicom Production, which will bring global production operations under one umbrella. CEO John Wren emphasized on an investor call Tuesday that this move is expected to generate substantial revenue opportunities, positioning Omnicom to become a leader in the production space. The launch of Omnicom Production comes on the heels of a handful of additional partnership announcements, including the acquisition of creative studio Coffee & TV in February and collaborations with Adobe, Getty, Amazon, Google and OpenAI. What’s more, on July 10, the company debuted ArtBotAI, an intelligent content platform designed to create high-quality content at scale, just weeks after Omnicom’s TBWA debuted Collective AI, its own suite of AI tools made to benefit of both employees and clients. These developments may help enhance Omnicom’s position in the agency world’s increasingly heated AI battles. “From Gen AI to e-commerce to production, we are continuing to enhance our offerings to meet our clients’ needs for better inform strategic insights using AI, creatively inspired content that can be personalized at scale and investments in targeted media that can be measured through quantifiable outcomes, all delivered in the most efficient and effective manner,” said Wren.

Market reactions

Despite Omnicom’s largely positive results, at least one financial advisory group, BofA Securities (previously Bank of America Merrill Lynch), maintains a skeptical outlook. According to an Investing.com report, the group reduced its Omnicom shares target from $88 to $87, maintaining its ‘sell’ position on the company. The mixed reaction was reportedly due to concerns about the quality of growth and other financial factors that are not directly related to key business operations. Other firms, such as Barclays and Morgan Stanley, offered more favorable assessments of Omnicom, citing strong growth prospects, particularly in the advertising and media division. On Wednesday morning, shares of Omnicom were down more than 4% following the release of the Q2 report. But on the whole, Omnicom’s stock is performing well this year – shares have appreciated by 10.2% year-to-date, outperforming the broader industry, which has seen a 1.9% decline. Read more

The bullish holding company chief tells The Drum why he’s confident its model can withstand outside economic and political “pressures” and deliver better-than-expected growth this year. “Against all odds” is the well-rehearsed phrase Arthur Sadoun returns to time and again during our conversation about Publicis Groupe’s strong first-half financials and its correspondingly upgraded full-year forecast.

For the sake of the health of the industry as a whole, is it important that his peers perform strongly also? “Oh, yeah, I do give thought to that,” he says. “To be clear: I care a lot about the industry doing well because every time the industry is doing better, I am doing better, and we are building something we all want to be in.” The competitive edge doesn’t leave Sadoun for long, however. “Now, the reason why market share is important for me, very important for me, is that it is a demonstration of the superiority of our model.”

The investment world’s view

Barry Dudley, partner, Green Square: “Given the mayhem going on in the world right now, these are strong results from Publicis and its financial performance looks set to be at the very top of the pile again during this series of announcements from the big listed groups. But what really caught me was the enthusiasm for the future, both verbally from Sadoun and also in the numbers themselves, with the guidance for full-year organic revenue growth being lifted from 4-5% up to 5-6%. That’s a bold move. “Fundamental to this is Epsilon and its strength in data. This is an area that isn’t going to slow down. Sadoun referenced some businesses holding back on their AI investments – as this releases it will further fuel Publicis’s strong tech and data offer. Sapient has struggled of late with reductions in IT consulting revenues, but I’d expect this to come around in the future. Feels like the Publicis run of strong performance is going to continue for some time.” Read more