'Seriously tough' market sees STW not living up to expectations

By (incomplete) | 14 August 2014
STW CEO Michael Connaghan

STW CEO Michael Connaghan has described conditions as “seriously tough” with predictions that the media market is unlikely to see full year growth.

Announcing a half year underlying net profit of $19.3 million, Connaghan said that the “Australian economy is not firing" and that the group itself was not meeting expectations.

“Client spend is under pressure,” Connaghan said.

“So far this year we have not lived up to our high expectations.”

STW Net Profit After Tax lifted just 1% on last year on a revenues of $188.3 million, a rise of 5.3% on 2013.

He described the result as “creditable given seriously tough conditions in the media and marketing worlds”.

Connaghan told analysts that the traditional second half bounce would come, but that declines in media spending during the first half of the year meant it was unlikely media spending would end the year in growth.

He also highlighted the impact that negative consumer sentiment was having on the overall market.

“We are fighting harder than ever for gains in an environment of declining consumer confidence and a slump in advertising spending levels,” he said.

While denying he wanted to make a political statement, Connaghan fired a shot at the Abbott Government saying: “The night after the budget we saw a marked decline in consumer sentiment”.

But he was also self critical, concerned that the company had failed to win new business when expected and had also lost some major accounts.

"We have lost a couple of accounts and new business is something we need to address," he said.

Recent losses have included Vodafone and Diageo.

While STW noted the tough media market, he said expectations for organic profit growth for the full 2014 were marginally ahead of the prior year with mid-level single digit growth.

Although main media spending was suffering, he said diversification was underpinning the business with a focus on data and shopper marketing where STW had made significant investments.

The group said that its push into Asia was also paying dividends with a dozen companies now operating in the region.

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