ANALYSIS – Advertising industry outlook as global groups shift into high gear

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Credit: Maarten van den Heuvel via unsplash

Global advertising groups are increasingly seen by market analysts as leading indicators of the global economic rebound from pandemic year 2020.

Half-year results from major players show the industry is recovering faster than expected from the crisis as brands return to the market.

WPP’s June quarter was a record high, IPG described a remarkable rebound, Omnicom is bullish on many fronts and Publicis is looking at a recovery to pre-pandemic levels a year ahead of expectations.

Omnicom Group
Omnicom reported better-than-expected revenue for the June quarter at $3.57 billion, up 27.5% from the same three months last year. Organic growth was 24.4% or $682 million.

CEO John Wren: “We expect our return to growth to continue in the second half. However, as long as COVID-19 remains a public health threat, some uncertainty regarding economic conditions will persist, which could impact our customers’ spending plans and performance. of our activities may vary by geography and discipline. »

Wren, in an analyst briefing: “We also continued to see year-over-year operating margin improvement resulting from proactive management of our discretionary addressable spend cost categories, including a reduction travel and related costs as well as reductions in certain costs of operating our offices given the continuation of the remote working environment, as well as the benefits of some of the repositioning actions taken in the second quarter 2020.

“I’m optimistic about our precision marketing group, very optimistic about our media operations and some of the changes we’ve made there. I am optimistic that our experiential business, which suffered greatly during COVID but has returned in places like China, will return, and when it does, it will contribute significantly to our growth. And health care continues, and I think especially as a result of things like COVID and especially people who have issues being more exposed than otherwise healthy people, I think that’s a commitment that every single person on the planet is going to be exceeded – you know, it’s going to be really focused, so I think we’re in some really good places.

“With all the confusion, noise and various media you can turn to, I can’t underestimate our creativity. I can’t underestimate how important it is in every component of our business and always has been, since the founding by two creative leaders of Omnicom 30 years ago. It’s not something you can add to a technology-based business or an account service-type business. Creativity is a philosophy, it’s not an individual, so I think I’m very optimistic on all levels about the things we’re capable of doing.

Interpublic group (IPG)

The company, announcing its half-year results, raised its expectations for the full year. “Based on continued progress and public health concerns, we believe we can achieve full year organic growth of 9% to 10%. And with this level of growth, we expect to achieve a margin of ‘Adjusted EBITDA of around 16% in 2021.’

Net revenue increased 22.5% to $2.27 billion in the June quarter as organic growth exceeded pre-pandemic levels. Organic growth was nearly 20% in the three months compared to the same quarter last year, when the company posted a 9.9% decline at the height of the economic fallout from the pandemic. Compared to the June 2019 quarter, organic growth was 7.9% higher.

WPP
The company now expects to do better than expected this year. For the full year 2021, like-for-like revenue growth less pass-through costs is now expected to increase by 9% to 10%.

Chief Financial Officer John Rogers, advising market analysts: “…there remain near-term uncertainties — COVID, travel restrictions and the economic outlook — but we nonetheless had very positive momentum in the first half. And looking here, we expect that momentum to continue into the second half and also into 2022.”

CEO Mark Read said the June quarter was the strongest on record as customers reinvested in marketing, particularly digital media, e-commerce and marketing technology. within three months to June. LFL revenue less pass-through costs was 11%, approximately 0.5% higher than in the first half of 2019.

Publicis Group
Posted 17.1% organic growth in the June quarter, recovering ground lost during the height of the economic fallout from the pandemic. The increase compares to a 13% decline in the same three months of 2020. Net revenue for the quarter increased 10.7% to 2.539 billion euros.

CEO Arthur Sadoun: “We now expect to fully recover to pre-pandemic levels, a year ahead of our initial expectations, with full-year organic growth of 7% and a full recovery in H2, and operating margin by 17%, provided there are no major deteriorations in the global health situation.

Dentsu
Organic revenue growth saw a “significant performance rebound” to 15% in the June quarter. Revenue for the quarter was 243,863 JPY, up 18.2%.

The Group expects high single-digit organic growth for fiscal 2021, with sights set on achieving long-standing 2022 margin targets of 20% for Dentsu Japan Network and 15% for Dentsu International with a year in advance.

The APAC region was driven by double-digit growth in Australia, Indonesia, South Korea, Singapore and Thailand.

CEO Toshihiro Yamamoto said the strong second quarter performance reflects growing consumer and customer confidence across all regions. “Underlying earnings growth continues to be strong, exceeding our expectations, and demonstrates our commitment to our margin targets.”

Havas Group
Havas recorded a strong rebound in its activities, recording organic net sales growth of 15.8% in the June quarter after 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 In 2021, Havas’ sales were €1.048 billion, up 7.1%.

By region in the second quarter of 2021, the main contributors were Europe (+19.6%) and North America (+10.2%). Asia-Pacific rebounded strongly (+21.1%).

“The Havas Group is approaching the second half of 2021 with confidence thanks to a sustained level of activity. The Group won many new customers, 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 mandates covering multi-year periods. The communications industry as a whole is very dynamic.

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