Search results matching tag 'WPP'

Much to celebrate at Media Week Awards

1641923 — Fri, 30 Oct 2009 14:45:00 GMT

Last night’s Media Week Awards at the Grosvenor proved yet again that no one parties like the media fraternity.

While other ‘big’ awards have been, well, rather less big this year, Media Week’s annual bash was as large and as vibrant as ever, with more than 1,300 attendees representing media owners, agencies and clients.

Of course the main topic for the night was predetermined long ago: Just how bad is the current economic climate?, how much worse will it get?, and when will real growth start to appear?

As one newspaper managing director told me, “everyone’s still talking a good game, and I think that’s important, but behind closed doors we all know any talk of recovery is grossly premature”.

This sentiment supports downgraded ad forecasts by ZenithOptimedia earlier this month, which marked the UK out as one of the world’s biggest fallers this year, after a "worse than expected first half of 2009".

But not even the current climate could deflate the worthy winners last night, with Mediaedge:cia paving the way after winning the industry’s biggest accolade, Media Week’s Agency of The Year.

The WPP agency continues to go from strength-to-strength, growing billings 5% year-on-year at a time when the wider market is battling double-digit declines.

While fierce rivalries within the British media mean very few awards ever go undisputed: the crowning of MEC last night was one of those rare exceptions.

“I suppose if we were going to lose to anyone, it should have been them,” said one runner-up agency head begrudgingly.

“Can’t really argue with that," opined another, "but lets see where they go from here,” which for those who don’t know, is high praise indeed in agency-land.

Comedian Frankie Boyle aptly set the tone for the evening from the off, being suitably funny and offensive, with an added edge of instability.

Of course, not even the best celebrations run entirely smoothly, and when OK!’s after party was gate-crashed by footballer Shaun Wright-Philips and his “crew”, it was definitely time to go home.

Now where's the Pro Plus?

Public company profits fall by half, or not?

1699071 — Sat, 03 Oct 2009 10:37:00 GMT

The striking feature of yesterday's Fintellect report (see below) is not that eleven publicly listed marketing companies have suffered on average a 55% fall in profits between the first half of 2008 and the first half of 2009, but that many of those companies are presenting their results in a manner that suggests that such a fall in profits had not happened - or at least not to them.

Using the now popular term "headline" for profits that in reality are often a long way removed from the true profits earned for shareholders, some companies imply that costs of rationalisation, severance payments, writing down past acquisition prices and the like are not real costs. They may be "non-recurring" or "exceptional", but without doubt they are real.

They reduce the payback - and therefore the return - on the cost of acquiring businesses that are subject to rationalisation or redundancies. As they reduce the profits earned over time the only legitimate debate would be about whether they should be spread over time or charged in one lump sum, not whether they should be ignored completely.

So shareholders should be wary of companies that try to sweep the bad news under the "headline" carpet. The costs will not go away even if they are hidden from view. And the investment analysis industry ought to be less enthusiastic about promoting the idea of "headline" results. It may help to boost share prices, and thereby fuel more stock market activity (something that investment bankers and brokers doubtless welcome) but in the long term it will discredit them.

Of course it is sensible for companies to explain what the underlying results would have been without the unusual items they choose to highlight, as they do in pointing out the impact of foreign currency movements for example. But that's not the same as promoting a different version of their results and trying to influence the share price as if the charges had never occurred.

The trend towards highlighting "headline" results has been accelerated by various new accounting rules that aim to measure profits in increasingly theoretical and controversial terms - something that many company managements understandably resent, irrespective of their merit, and therefore adjust in their "headline" figures.

Sooner or later the Government must decide which definition of profit should be followed and which should be outlawed. Should it be the definition authorised by company law and accounting regulations? Or should it be what companies and supportive analysts prefer (seemingly with the approval of the stock exchange too)?

Without such clarification, the values of publicly listed companies will be based on a profit measurement regime increasingly far removed from legal requirements. Eventually that will bring discredit to both measures. The crunch will come when a major scandal arises and the market is found to have relied on greatly distorted information.

M&C Saatchi in pretty good shape after profit fall

1699071 — Mon, 28 Sep 2009 10:34:00 GMT

At first sight a 24.7% fall in operating profit is not good news, but at M&C Saatchi it could have been much worse if its balance sheet was not relatively strong.

Indeed the reasons for the decline announced last week were predictable and not life-threatening.

The group lost revenue because of the recession. Profits suffered a particularly nasty dent at the relatively recently acquired subsidiary Clear Ideas because it is a cyclical project-based consultancy business and fewer clients spend money on consultancy in tough times even if they should (something that perhaps could have been highlighted more prominently when it was acquired).

Interest rates dropped and deprived the group of some income from the cash flow it normally generates in its media buying operations. And its investment in new offices lopped £588,000 off the bottom line.

On the plus side, profits benefitted from a £429,000 paper gain arising on the latest estimate of notional interest on the amount that would have to be paid to acquire outstanding minority interests in subsidiaries - one of the accounting regulators' more balmy innovations.

But, by comparison with many of its peers, the outcome of a post-tax profit of £3.6 million for the half year to 30 June compared with £4.8 million in the same period last year looks pretty good, if not something to write home about. Perhaps that's one reason why its share price stengthened last month (see table below).

And the balance sheet remains fairly strong with net borrowings of just £0.4 million and shareholders' funds of £52 million - a situation doubtless helped by owning a media buying business like Walker Media. Shareholders' funds might be reduced a little if any potential impairment charge were to become necessary in relation to the cost of acquiring Clear Ideas. But hopefully the company's silence on this topic can be interpreted as a reassuring feature.

However, the group continued to owe its short-term creditors more than its readily realisable assets - the gap was £5.9 million at 30 June compared with £8 million last December - and would have to draw more heavily on its overdraft facility if all its creditors wanted to be paid at once. M&C Saatchi is not alone in that.

CONGRATULATIONS TO STEVE HENRY AND ALBION.

1725283 — Thu, 13 Aug 2009 23:46:00 GMT

We're delighted to see our great friend and fellow blogger Steve Henry has taken up a non exec post at Albion.

Steve joins Mandy Pooler on Albion's board. Mandy is a dear friend of ours too. Not to mention one of the greatest names in media. Years ago when Mandy and Robert both worked at WPP, we did joint speeches at conferences on the future of media. It seems so long ago now.

Anyway, according to Albion's press release, 'Steve's role will be to mentor Albion’s creative director Nick Darken and his team and help take the agency’s creative output to a new level.' Excellent.

It's great to see Steve getting back involved and rolling his sleeves up. There is no greater talent than Steve.

However, it seems we've upset Albion recently. Something we said. And for that we're sorry.

Consequently they've been twittering away about what a couple of old plonkers Garry and I are. Someone's even opened a fake twitter account in our name and is sending abusive tweets. (Obviously we can't be sure that's Albion, but understandably we have our suspicions.)

In normal circumstances we wouldn't give a monkey's what Albion said about us. We're big enough, and ugly enough. But as two of our best mates are on their board, it would be a shame for there to be bad blood.

Perhaps once you've got your feet under the desk Steve, you'd like to bring the guys at Albion over to one of our bloggers' breakfasts.

You never know, they might even find they like us.

Aegis loses CFO in board reshuffle that puts non-execs back in majority

1699071 — Thu, 16 Jul 2009 08:13:00 GMT

Today's announcement that Aegis Group's chief financial officer Alicja Lesniak will be leaving the company in October is the latest of the moves made by part-time chairman and interim chief executive John Napier to "complete the major part of the reorganisation of the Aegis Board" since arriving last year. Curiously it doesn't seem to have occurred to him that his own all-powerful dual role is inconsistent with present-day practice.

Lesniak has a long track record of serving quality companies in the marketing services sector and will be succeeded by the internal promotion of Nick Priday.

The other major board changes announced today include the departure of heavyweight non-executive Dr Brendan O'Neill - formerly chief executive of Guinness Brewing and ICI - who will leave in October. Three other non-executives left the board earlier this year - see Half the non-executive directors leave Aegis at AGM.

Three newly appointed directors will result in the majority of the board again being made up of non-executives, this time with most having backgrounds in finance, consultancy, human resources, and information technology. The one outstanding exception among the continuing non-executives is Charles Strauss who has been on the Aegis board since 2003, is a US national and has 35 years' international executive experience in consumer products businesses, including 18 with Unilever.

None of the five ongoing non-executives appears to have any first-hand executive experience in the media or marketing sectors, albeit at one stage in his career newcomer John Brady headed up McKinsey's European retail and marketing consultancy practice. So the future strategy of the group is likely to be overseen and therefore influenced by people with limited knowledge of the business and no executive responsibility for it - a current fashion that is evident too at WPP (although its non-executives have greater and more relevant experience) and is widespread in the United States.

How such a group of non-executives would respond to any future overtures from people like Vincent Bolloré remains to be seen. Fortunately he has declared himself to be a more passive investor than on first arrival, but nothing is forever and the risk remains that the new board would give greater weight to short-term investor pressures than to building Aegis into an even more successful independent business.

WPP’s half year results critical to confidence in the sector

1699071 — Fri, 03 Jul 2009 12:11:00 GMT

If yesterday's fall in WPP's share price was the result of an advance leak to analysts of the group's half year results to be announced next month, it should come as no great surprise.

The group had already acknowledged that revenues were behind expectations and margins were under pressure. (see WPP's profit being squeezed between lower revenues and higher costs). And the timing of the Taylor Nelson acquisition has probably had an adverse effect too as market research seems to be suffering particularly badly from the economic decline (see Cello warns of reduced out-turn for year).

What matters almost as much is the performance of the group's core networks. Are they losing revenue faster than their competitors large or small? And how is WPP's balance sheet standing up to the economic turmoil?

With its stock market capitalisation of £4.8 billion now standing far below the book value of the group's net assets of roughly £6 billion, someone somewhere is going to start making the observation first mooted in this blog a month ago: if the market value of the whole is so much lower than the book value of the component parts, either the net assets will need to be devalued or maybe WPP should contemplate shedding some of the parts?

But most important of all, for decades WPP has demonstrated that a UK company (technically now an Irish company) can build a major global force in the marketing services sector. Any serious setback would be bad not just for WPP and its shareholders but also for confidence in the sector as a whole. And no-one should be wishing for that.

© Fintellect Ltd

White linen, not hair, for Jupiter Drawing Room shirts

1714221 — Wed, 24 Jun 2009 13:32:00 GMT

Not much evidence that the small matter of a global recession is affecting the fortunes or lifestyle choices of the Jupiter Drawing Room, South Africa.

The two-agency brand, which became part of WPP this year, and is headed by the fastidious and fiercely English Graham Warsop, has brought an 18-strong contingent to Cannes for the entire week.

And as part of the "reward" that Warsop unashamedly admits the Cannes trip is, the group went en masse for a day trip to Picasso's castle near Aix-en-Provence the other day.

The castle has been closed for 35 years and remained just as the artist left it but has been opened by his daughter for three months this year.
"It was just amazing," the white linen-clad Warsop told me at thenetworkone party.

With no pretence of having to cut his cloth to suit more subdued times, Warsop is delightfully upbeat. The recession has been good for his group, he claims, because clients are looking for agencies with case studies of work that works.

Interpublic well prepared to minimise damage from US car bankruptcies?

1699071 — Fri, 05 Jun 2009 17:35:00 GMT

WPP seems so far to have avoided the consequences of the US car-makers' bankruptcies - or is keeping very quiet about it - but of the three other major global marketing groups affected the Interpublic Group seems to have been fairly well prepared.

The group escaped exposure to the Chrysler collapse, but is owed $20 million by General Motors. That amount is much smaller than the $58 million owed to Omnicom agencies by Chrysler or the massive $127 million owed by GM to Publicis agencies.

However, exposure to these bankruptcies is not limited to unpaid bills. Doubts will also arise over unbilled work in progress or - as in the case of Omnicom's relationship with Chrysler - potential costs of closing dependent offices if the client business moves to another agency as a result of the turmoil.

Interpublic itself announced on 5 June that its maximum exposure to GM companies in the US was estimated to be $50 million - a lot more than the $20 million in unpaid bills disclosed in the bankruptcy petition - and the excess appears to relate mainly to unbilled work in progress.

No-one knows yet what proportion of these debts or other exposures will be recovered, but Interpublic took two proactive steps in anticipation of the GM bankruptcy. First it obtained the agreement of its bankers to exclude its GM exposure when assessing whether it was complying with its borrowing covenants (see IPG negotiates protective deal with bankers in case GM collapses). And secondly, Interpublic hired a top GM marketing executive to maximise the prospect of maintaining close relationships with operating units during and beyond bankruptcy.

At the other extreme, Publicis seems to have done rather less by way of protective measures before GM became bankrupt. Admittedly, the exposure of its Starcom Mediavest network to media owners may be greatly reduced where it can show that it had not been paid by GM for the media it has booked (the concept of sequential liability). Indeed Publicis was quick to put out a statement that it expected its maximum exposure to be $78 million.

But $78 million is still rather more than Interpublic's estimated $50 million maximum. Omnicom hasn't quantified its maximum exposure as such but told analysts that in an absolutely worst case scenario it would not expect to lose more than $35 million. Of course, these estimates may still be subject to change. As Interpublic put it: "GM's subsidiaries outside the US have not commenced bankruptcy or similar proceedings, and if they did so the company's potential exposure could increase."

Perhaps the current position reflects something of the personalities of the global chief executives. Omnicom's John Wren and Interpublic's Michael Roth were both trained in accountancy and inevitably have a stronger bias towards financial matters, whereas at Publicis Maurice Levy comes across as slightly more of a successful showman and optimist - the Phineas Taylor Barnum of the marketing industry.

WPP’s profit being squeezed between lower revenues and higher costs

1699071 — Tue, 02 Jun 2009 17:57:00 GMT

WPP Group shareholders learned today that its pre-tax profit for the first four months of 2009 has been caught in a pincer movement between revenue shortfalls and cost increases.

In particular the timing of the Taylor Nelson Sofres acquisition is proving to be less than beneficial as the group struggles to contain borrowing costs while revenues from the group's insight division that includes Taylor Nelson have been "most affected" by the recession (see Some pearls from WPP's annual report).

Profit before tax for the first four months of 2009 was "significantly down on the previous year", chairman Philip Lader told the company's annual meeting.

However, Lader said the group's headline operating margin was "above budget" for the period. This comes as a surprise because only a month ago WPP said it would be difficult to maintain operating margins at the level achieved in 2008 (see WPP becomes global leader but predicts lower margins as recession bites). One possible interpretation is that the budgeted margin for the first four months of this year was lower than that achieved in 2008. In that case little glory should be attached to beating it.

Net debt at the end of April exceeded £3.5 billion while shareholders' funds stood at little more than £6 billion - giving a relatively comfortable debt/equity ratio of 0.6:1.

Interestingly, the stock market value of WPP fell today by £322 million to a figure below the £6 billion of shareholders' funds employed in the business. So the stock market value of the whole is now lower than the aggregate book value of the parts. That's not a very comfortable position to be in.

Mission funding negotiations completed at a high price

1699071 — Sat, 23 May 2009 12:44:00 GMT

The Mission Marketing Group has successfully completed negotiations with its bankers and former shareholders of acquired companies on the restructuring of its borrowings (see Mission facing funding challenge), but will be paying its bankers fees that will wipe out the expected cash flow benefit of its restructuring.

The price for renegotiating its bank facilities will be a fee of up to £1 million in return for which Mission believes it has reduced its acquisition obligations payable in cash or loan notes by about £900,000.

Mission's directors believe the restructuring of its financial obligations to bankers and former shareholders "will ensure appropriate working capital is available for the group going forward".

Mission made no comment on how, if at all, the terms of its bank facilities may have been amended although it acknowledged that it has renegotiated the repayment profile. The company also acknowledged that, since publishing its 2008 accounts, it has had to modify the way in which it had expected to settle some of its short-term obligations to former shareholders in companies it has acquired.

Of the acquisition obligations of £7.3 million due for settlement within one year, the company had assumed that £4.7 million would be payable in cash or loan notes convertible into cash at a subsequent date. However, Mission has now agreed to increase by £1 million the portion of the short-term obligations to former shareholders in Bray Leino payable in cash or loan notes - increasing the total short-term obligation in cash or loan notes to £5.7 million - and has reduced the share component of the Bray Leino obligation from £2.5 million to £1.5 million. Presumably those former shareholders were reluctant to take as many shares as had previously been assumed.

In a review conducted by Fintellect last year and published in Marketing Services Financial Intelligence, Mission was one of the three listed companies in the sector that appeared to have the most vulnerable balance sheets at that time. The others were Taylor Nelson Sofres (now acquired by WPP) and Cagney. Since then Mission has raised an extra £1 million of share capital (less costs) as well as restructured its financial obligations.