Credit: Brock Wegner via Unsplash
The clients of the global advertising holding companies are still cautious but are not cutting their spend, according to analysis of June quarter results for IPG, Omnicom, Publicis Groupe, WPP, dentsu and Havas.
However, clients are taking longer to make decisions due to macro uncertainty and tariff concerns.
The companies with the strongest client satisfaction scores-- Publicis, Havas -- are performing better.
Those facing more client losses or spending cuts -- WPP and dentsu international -- are not so happy.
All the holding groups, regardless of their current results, are investing heavily in data and AI capabilities.
They view AI as critical for future competitiveness.
While comparing companies using different metrics to measure growth is difficult, Publicis was well above its peers in the three months to June, up 5.9% in the quarter and 5.4% for the half year.
Then came Omnicom at 3% for the quarter and Havas at 2.6%.
Below the line was dentsu at -0.2% H1, IPG: -3.5% and WPP -5.8%.
Most referenced difficult operating conditions.
IPG: "The macro environment has been more volatile than anticipated as we entered the year.”
Dentsu: A "challenging business environment" and "uncertain macro environment is expected to continue".
Publicis: "lack of visibility in a challenging macro context” and a “challenging macroeconomic environment”.
Havas: Noted uncertainty.
WPP: "challenging macro environment coupled with slower net new business weighed on our performance.”
Omnicom: "Other than some specific clients have issues with them being more impacted by proposed tariffs than not. In general, I don't think the environment has changed all that much."
Publicis, citing "material" market share gains and a dozen big pitch wins, now expects to end the year with 5% organic growth, up from its previous 4% to 5% range.
The France-based company is in such good shape it also plans acquisitions to build revenue.
Publicis is well ahead of the pack, including the UK's WPP which downgraded its full year revenue outlook in the face of weak sales, client losses, a pull back on ad spend and a shrinking pitch runway.
Omnicom, in the final lap of its takeover of IPG which will make it the biggest advertising group in the world, saw June quarter organic revenue increase 3% to $4.015 billion, better than estimates by Wall Street analysts.
However, the company has been shedding staff and reorganising in preparation of absorbing IPG’s business.
The company spent $88.8 million on “repositioning,” including “severance actions” related to efficiency initiatives, mainly within the advertising and production groups.
Operating expenses increased 7% to $232.9 million, including $66 million of costs related to the acquisition of IPG.
Omnicom's takeover of IPG, approved by the US competition and consumer protection watchdog the Federal Trade Commission, is due to close before the end of the year.
Over at IPG, the company posted a 3.5% fall in organic net revenue for the June quarter “due to prior-year client account activity” and as restructuring costs rose in preparation for being swallowed by rival Omnicom.
After-tax expenses for restructuring totalled $88.4 million. Full year restructuring costs were expected to be $375 million to $400 million.
Salaries and related expenses fell 11.5% to $1.38 billion, mainly driven by lower base salaries, benefits and tax, as well as lower bonuses and severance costs.
The global advertising group maintained its guidance for a fall in full year organic net revenue of 1% to 2%.
Dentsu, with negative growth from its international business, has taken a chainsaw to headcount in its offices outside its Japan headquarters.
The company, reporting its half year results with organic growth below expectations at -0.2%, downgraded its full year forecast for organic growth to 0% from 1% and suspended dividends.
The cuts are targeted to headquarters and back-office functions outside of Japan, which is still growing as foreign operations slide.
Havas, reporting “numerous” new business wins, reported organic growth up 2.3% in the half year, hitting 2.6% in the June quarter, up from 2.1% in the March quarter.
The company reaffirmed guidance of net revenue growth of 2% for the full year.
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