Analysis – The Advertising Industry Outlook As Global Groups Switch Into High Gear
By Chris Pash
The global advertising groups are increasingly being seen by market analysts as leading indicators of the global economic rebound following the 2020 pandemic year.
The half-year results from the big players show the industry recovering faster than expected from the slump as brands jump back into the market.
WPP’s June quarter was a record, IPG described a remarkable rebound, Omnicom is optimistic on several counts and Publicis is looking at recovery to pre-pandemic levels a year ahead of expectations.
Omnicom reported top line revenue for the June quarter better than expected at $US3.57 billion, 27.5% higher than the same three months last year. Organic growth was 24.4% or $US682 million.
CEO John Wren: “We expect our return to growth will continue in the second half. However, as long as COVID-19 remains a public health threat, some uncertainty regarding economic conditions will continue which could impact our clients’ spending plans and the performance of our businesses may vary by geography and discipline.”
Wren, in a briefing of analysts: “We also continued to see operating margin improvement year-over-year resulting from proactive management of our discretionary addressable spend cost categories, including a reduction in travel and related costs as well as reductions in certain costs of operating our offices given the continued remote work environment, as well as benefits from some of the repositioning actions taken back in the second quarter of 2020.
“I’m optimistic about our precision marketing group, very optimistic about our media operations and some of the changes we made there. I am optimistic that our experiential business, which has suffered dearly during COVID but has returned in places like China, will come back, and when it does, it will contribute to our growth significantly. And healthcare continues, and I think especially coming out of things like COVID and especially people who have issues being more exposed than otherwise healthy people, I think is a commitment that every person on the planet is going to be over–you know, is going to be really focused on, so I think we’re in some great places.
“With all the confusion and noise and various media that you can reach out to, I cannot understate our creativity. I can’t understate how it’s in every component of our business and it’s always been, since the foundation by two creative leaders of Omnicom 30 years ago. It’s not something that you can add to a technology-based company or add to an account service type of company. Creative is a philosophy, it’s not an individual, so I think I’m very bullish across the board about the things that we’re able to do.”
Interpublic Group (IPG)
The company, announcing its half year results, upgraded full year expectations. “Predicated on the continued progress and public health issues, we believe that we can deliver organic growth for the full year of 9% to 10%. And with that level of growth, we would expect to achieve 2021 adjusted EBITDA margin of approximately 16%.”
Net revenue urged 22.5% to $US2.27 billion in the June quarter with organic growth passing pre-pandemic levels. Organic growth was almost 20% in the three months compared to the same quarter last year when the company recorded a negative 9.9% during the depths of the economic fallout from the pandemic. Compared to the June quarter in 2019, organic growth was 7.9% higher.
The company now expects to do better than expected this year. Full year 2021 like-for-like revenue less pass-through costs growth is now expected to be up 9%-10%.
CFO John Rogers, briefing market analysts: “ … there remain short-term uncertainties — COVID, travel restrictions and the economic outlook — but nonetheless we’ve had very positive momentum in the first half of the year. And as we look here, we would expect that momentum to continue into the second half and equally into 2022.”
CEO Mark Read says the June quarter was the highest on record as clients reinvest in marketing, particularly in digital media, ecommerce and marketing technology.The world’s biggest advertising group posted like-for-like revenue up 16.1% in the six months and 26.4% in the three months to June. LFL revenue less pass-through costs was 11%, about 0.5% higher than the 2019 first half.
Posted organic growth of 17.1% in the June quarter, recovering ground lost during the depths of the economic fallout from the pandemic. The lift compares to a 13% fall in the same three months of 2020. Net revenue for the quarter was up 10.7% to € 2.539 billion.
CEO Arthur Sadoun: “We now expect to totally recover to pre-pandemic levels, a year ahead of our initial expectations, with full year organic growth at 7% and full recovery in H2, and an operating margin of 17%, provided there are no major deteriorations in the global sanitary situation.”
Organic revenue growth saw a “significant rebound in performance” at 15% in the June quarter. Top line revenue for the quarter was 243,863 JPY, up 18.2%.
The Group expects high single digit organic growth for FY2021, with a line of sight to delivering the long held 2022 margin targets of 20% for Dentsu Japan Network and 15% for Dentsu International one year early.
The APAC region was driven by double digit growth from Australia, Indonesia, South Korea, Singapore and Thailand.
CEO Toshihiro Yamamoto says the strong second quarter performance reflects growing consumer and client confidence across all regions. “Underlying profit growth continues to be strong, exceeding our expectations, and demonstrates our commitment to our margin targets.”
Havas recorded a strong rebound in its businesses, reporting organic growth in net revenue of 15.8% in the June quarter following a decline of 7.5% in the fourth quarter of 2020 and 0.8% in the first quarter of 2021. For the six months to June 2021, Havas revenue was €1.048 billion, up by 7.1%.
By region in the second quarter of 2021, the biggest contributors were Europe (+19.6%) and North America (+10.2%). Asia-Pacific picked up strongly (+21.1%).
“Havas Group enters the second half of 2021 with confidence thanks to sustained levels of business. The Group has won numerous new accounts, such as Volkswagen (CX), Cox Communications (Creative), and De Beers (Media). In addition, the Group renewed two major clients, Sanofi and Novartis (Communication Health), for duties covering multi-year periods. The communications industry as a whole is proving highly dynamic.”