Another day, another dollar less. Quarterly results from the big agency groups paint a revealing picture of financial pain, and nowhere more poignantly than in the case of the stricken automobile sector.
Publicis Groupe recently disclosed that its exposure to bankrupt General Motors was ‘only’ $12.8m (about £8m) rather than the £78m (£47m) originally projected. That did little to soften the blow when the half-way figures came out a few days later: net income (pre-tax profit) down 13%, and nasty deterioration in organic growth in the last quarter. The only bright spot was a 6% increase in digital revenues over the six months. That, and the assurance of group chief executive Maurice Levy that things can only get better – from September onwards. Tell that to the 1,800 people (4% of the group) he has had to ‘let go’ this year.
Still, Publicis did a lot better than Interpublic Group, home of Lowe and McCann Erickson (one of whose biggest clients is GM). IPG has actually managed to achieve a loss of $53m (£32m) over the six months. So the reduction of its latest quarterly net income by 76% must be accounted something of a triumph by comparison with first quarter performance. Quite a lot of its losses are attributable to the severance costs of the 4,100 people it has made redundant – 9% of its workforce.
Omnicom (BBDO, TBWA, DDB etc), too, posted pretty dismal figures, slightly more encouraging than IPG’s but not, on most criteria, as buoyant as Publicis’. It is laying off 3,500 of its staff, nearly 5%. Profits for the last quarter were 24% down, about the same as the previous quarter. Which was probably pretty good really, considering Omnicom’s $58m exposure to bankrupt Chrysler. On this subject, however, chairman and ceo John Wren was understandably vague – despite analysts’ obvious interest in the subject. It was the second biggest search term employed in Omnicom’s earnings call. There are, as I have pointed out before, some unresolved mysteries about Chrysler and Omnicom.
As for WPP, we will not be seeing its half-year results until the end of August. Things are not looking too clever, though. True, WPP is the odd one out so far as the car industry is concerned. Not only has Ford not made its way to the bankruptcy court, it has even managed a small operating profit this quarter. So no write-downs; but that’s slim cause for comfort, as ad spend is likely to be depressed for some time to come. Redundancies give us a fuller picture. In a trading statement released early in June, WPP admitted to making 4,300 employees redundant – about 4% – since the beginning of the calendar year. The final figure is expected to be about 7,200.
Both Publicis’ Levy and Omnicom’s Wren seem to be spinning the idea that we are at, or near, the nadir. Don’t believe everything you hear, though. Next quarter’s earnings may look better than they really are simply because the dive they took in Q3 last year will flatter the percentage increase. That, at least, is the view of WPP ceo Sir Martin Sorrell.