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Investor view: Where now for agency groups after pandemic bounceback?

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10.08.2021

This is the first of my columns for Campaign covering the world of media, tech and everything related. By way of introduction, I was a City analyst covering the space for 20 years so I have seen a lot of change in that time.

I will be taking a look at the landscape from a bigger picture view and from a financial and investors’ standpoint. Given that, I thought I would start off by looking at what the agency results so far tell us about the future for the groups.

First, the good news; the agency groups seem to be back on track. No surprise that all of them have shown strong growth; the more important point is how they compare with 2019 and there the news is positive.

WPP said its Q2 organic revenues were 1.3% higher than Q2 2019 (0.5% for H1), with Publicis Groupe pointing to a 2% improvement over the quarter and Interpublic with a very strong 7.9% improvement over Q2 2019.

That is important for several reasons. First, the trend is your friend and, for the agencies, it suggests a better trend than pre-pandemic when the agency groups were mainly seeing organic revenue declines. That may lend weight to the argument advertisers have recognised the value of agency services.

Second, it hints that some of the pricing pressure on services may be lessening and the reduced repitching activity (as highlighted by WPP) may suggest a desire for stability from advertisers.

That back-on-track view is also reinforced by the raising of guidance by most of the groups (Omnicom has been more circumspect). So WPP and Interpublic raised top-line guidance from the mid-single-digit organic revenue growth to 9-10%, and both Publicis and WPP said they should be back to pre-pandemic levels by year end, one year earlier than........

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