WPP AUNZ horizontality model gains traction, delivers 3% profit

Lindsay Bennett
By Lindsay Bennett | 23 February 2018
Mike Connaghan

WPP AUNZ’s horizontality model is gaining traction with the industry and has helped the holding company deliver a 3.1% lift in profit before tax, hitting $125 million.

In its second full year results since WPP and STW merged in 2015, the company reported a small lift in revenue, up 0.6% to $870m.

WPP AUNZ said it delivered “better than expected” results against a flat media market and soft conditions.

WPP AUNZ CEO Mike Connaghan said the media, advertising and digital segments of the business are leading the pack in terms of performance, growing its market position with new business wins and bespoke client team models.

The holding company has created bespoke teams for HSBC, Bankwest, Vodafone, Westpac, Westfield, Aldi and other brands.

WPP AUNZ has seen “early success” with these team models and the consolidation of its 18 agencies. This included the combination of The White Agency and Grey, DT and AKQA, Designworks and Landor and Ikon NZ with GroupM.

The advertising and media sector delivered net sales of $486 million, up 25% compared to 2017.

In other sectors, including data investment management and public relations, Connaghan said the business has experienced pressure from both "market softness" and "individual company underperformance".

Revenue at the company's public relation and affairs arm declined 7.2%, spanning across Ogilvy PR, Cannings Purple, Hill + Knowlton Strategies, PPR and Pulse Communications. 

The division had a net revenue of $62.4m in 2016 which fell to $57.9m.

However, while revenue was down 7.2% ($4.5m) its public relations and public affairs division maintained its profit which led to a 1.2% increase in its margin to 16.1%. 

WPP AUNZ reaffirmed its commitment to delivering $15m in cost synergies as part of the WPP and STW merger, which it said it’s on track to deliver.

The group achieved cumulative annual synergies of $14.9m in 2017 up from $4.9m in 2016. These synergies came from the consolidation of WPP AUNZ’s property footprint, with more agencies moving into the campus building in Millers Point.

It admits the consolidation of WPP and STW’s IT and shares services has been an area of delay and will be a focus of this year.

The directors of WPP AUNZ declared a fully franked dividend of 4.2% per share bringing total dividends for the year to 6.3% per share.

Connaghan predicted the overall market conditions for this year will continue to be flat. He said the media market will be driven by digital and outdoor, while there will be a challenging market for retail and consumer facing brands.

For 2018, the company is focusing on unlocking revenue growth by driving horizontality and increasing its investment in its people and culture and production offering.

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