Tag Archives: omnicom

WPP will still be No.1 in UK PR market post Publicis Omnicom merger implies PRWeek Top 150 2013

As pretty much anyone in the Marcoms world must know by now, yesterday Omnicom and Publicis, the 2nd and 3rd largest groups, announced they are seeking to merge. The merger will create a combined group that will overtake WPP to become the world’s largest with revenues of $22.7bn in 2012.

Based on the Holmes Report’s recent Global PR Rankings the combined group will have PR income of $1.8bn, which it estimates will make it the largest PR holding company in the world.

But what about the implications for the UK PR market?

As many of the key agencies and their parent groups don’t disclose UK PR figures the data is rather sketchy – see caveats below. However based on a combination of the PRWeek Top 150 estimates for Brunswick and WPP, Omnicom, Publicis and Interpublic‘s UK agencies, as well as Huntsworth’s accounts, we can have a decent stab at what the top 5 players will look like if the merger goes ahead.

The table below shows revenue in £m for the key PR agencies within WPP, Omnicom, Publicis and Interpublic from PRWeek’s 2013 Top 150 analysis.

Agency

WPP

Omnicom

Interpublic

Publicis

Weber Shandwick

35.5

Hill and Knowlton

26.5

RLM Finsbury

25.5

MSL Group

25.0

Ketchum Pleon

22.0

Oglivy PR

21.5

Golin Harris

17.0

Fishburn Hedges

14.0

Cohn & Wolfe

13.0

Fleishman Hillard

13.0

Burson Marsteller

10.5

Portland

10.0

Porter Novelli

8.0

Buchanan

6.5

Clarion 3.5

Total

107.0

67.0

52.5

25.0

According to the PRWeek 150 estimate, Brunswick’s 2012 income was £53.2m.

According to Huntsworth’s 2012 annual report its UK revenues were £64.3m. This includes revenues relating to healthcare (Huntsworth Health) whereas for most of the groups above health work is often classified within a different division. The UK healthcare headcount is 23% of the total according to the report. Adjusting for this suggests a public relations UK income figure of around £50m.

On the basis of these estimates the top 5 will look as follows post merger.

1. WPP £107.0m

2. Publicis Omnicom* £92.0m

3. Brunswick – £53.2m

4. Interpublic – £52.5m

5. Huntsworth – £50.0m

Their combined fee income of c. £355m gives these five c. 18-20% of the UK market based on previous estimates from 2011 of c. £1.8bn-£2bn.

*Update – Kreab Gavin Anderson has been excluded from the analysis on the basis that Omnicom only holds a minority stake.

Caveats

All the caveats relating to the PRWeek Top 150 figures apply here, the key one being they are estimates of course!

Also bear in mind that it could well be the case that some of the estimates above include revenues relating to the UK arm of a multinational agency that were derived from work outside the UK. Equally there could be agencies within each Marcoms group that are based outside the UK that do work with UK clients.

There is also the issue of agencies that aren’t labeled “PR” and so aren’t included in this analysis that will be doing some PR based work.

These are just the ones I can think of, there are bound to be a few more.

Next Fifteen outperforming the market

Click on image for larger version of graph

Next Fifteen SharePriceThere’s been a lot of talk in the last couple of weeks about PR finding it tough. Chime Communications and Huntsworth have both announced that their 2011 results are likely to be affected by the apparent slowdown in economic activity.

It isn’t just PR that’s finding things tough. Huntsworth is a PR group, but its worth remembering that only approx 50% of Chime’s revenues (though 60% of its profits) come from PR, the remainder from other marketing services and the share prices of the major multinational Marcoms groups have also taken a bit of a battering over the last few months.

As of 28/11/11 (16.50) some examples of these reductions from their 52 weeks highs are – WPP (-25.3%), Omnicom (-19.2%), Interpublic (-33.5%), Havas (-32.0%), Aegis (-29.6%) and Publicis (-19.8%).

This contrasts with the FTSE100 which was down around 13% against its 52 week high the same time this afternoon. Not that surprising as Marcoms usually underperforms in falling markets and overperforms in rising ones.

But as the graph above shows one quoted PR company has been bucking the trend. Next Fifteen is actually trading at a higher level than it was at the start of 2007 something none of the others can claim except for Publicis.

Next Fifteen is also the only one of these PR or Marcoms groups whose share price is up in calendar year 2011 (15%). Now obviously Next Fifteen is significantly smaller (market capitalisation £49m) than even Huntsworth (£90m) and Chime (£148m), nevermind the multinational groups but that doesn’t mean that outperforming the market is therefore easier.

In the Evening Standard a couple of weeks ago Tim Dyson, Next Fifteen’s CEO, put their success down to investment in digital and social media. In the analysis of the PR industry for 2010 that I helped the Holmes Report put together earlier this year the biggest success story was Edelman, (arguably) the first of the major PR brands to embrace digital, which climbed to the No.1 spot in the Holmes Report Global Rankings.

So perhaps this evidence demonstrates that though we can almost certainly expect another challenging year in 2012, there is still success to be found and particularly for those elements of the PR industry that are making digital core to their business.

PR Industry beating the market in 2009 and then some

I helped PRWeek pull together some analysis last week of the results of the PR elements of some key Marcoms groups. The results can be seen in the graph below (you will need to access the original file to see clearly. Notes at the end of this post re: sources and basis of data). What the graph very clearly shows is the (unsurprising) turnaround in fortunes of these groups from generally healthy growth rates in 2008, even in the second half in most cases, to substantial falls in the first half of 2009. The exception being Chime Communications who have bucked the trend and grown 9.5% in the first half of 2009.

PR revenue comparison

To put these figures in context I thought I would delve a little further here and look at relative sizes and then look at the market’s view of PR via their share price performance.

Size

Income

The combined PR income of WPP, Interpublic and Omincom was still approximately £1bn in the first half of 2009 (though this includes Interpublic’s event marketing and branding business) and this in turn represented around 11% of their overall total revenues of around £9.5bn. This compares with approximately £115m of PR based revenue for Chime, Huntsworth and Next Fifteen combined in the same period which represents the majority of their circa £165m of total combined revenue. So the big three’s PR income is around 9 times more.

Market capitalisation

The combined market capitalisation of the three larger groups is approximately £16bn as at 7th September 2009 compared to approximately £300m for the three smaller ones. Over 50 times greater.

So given their relative size the results of the larger groups are a much stronger indicator of the overall global PR market’s current performance. However the higher proportion of PR income in the income of the smaller groups arguably makes them a better indicator of how the market perceives the PR industry’s prospects given that they are all (Chime excepted) suffering a reduction of PR income of broadly similar levels.

Share Price movements in 2009

The graphs below show the movements in share prices of these same companies since the start of this calendar year. (Again you will probably need to view the actual files themselves – graph 1 – showing Chime, Huntsworth and Next Fifteen, graph 2 – showing Omnicom, Interpublic and WPP).

Comparison of PR group share prices Source FT.com

Comparison of Marcoms Groups share prices Source FT.com

The smaller groups that are either predominantly or wholly PR based (Chime, Huntsworth and Next Fifteen) have all outperformed the larger, broader, Marcoms groups during this period. Chime is up to over three times its level at the start of the year and Huntsworth isn’t far behind. Next Fifteen is also up around 60% despite predicting a significant fall in revenues in the first half of 2009. In fact their share prices are back to similar levels to where they were before the recession started.

This compares with increases of around 25-40% for the larger Marcoms groups. They have all therefore outperformed the market generally with the FTSE100 up approximately 10% and the DOW about 5% in the same period.

Of course given the difference in size the increases in the values of the larger groups are much greater in absolute £/$ terms than the smaller ones. However it is still interesting to note that these figures imply that the markets’ perceptions of the PR industry’s prospects has improved considerably over the last six months.

All of which suggests a healthy expectation of the industry’s performance in the coming months. Let’s hope they are right!

Sources/Basis

The analysis is based on publicly quoted figures included in investor presentations, interim and annual reports, SEC filings and in the case of Next Fifteen for 2009, analyst forecasts. Where possible the growth rates represent like for like organic growth excluding the impact of currency movements or acquisitions/disposals. Exceptions to this are Omnicom and Next Fifteen for whom these figures are headline changes as they do not disclose the impact of these items. Also Interpublic’s figures are based on their CMG division which includes their event marketing and branding businesses. If anyone is interested in the chapter and verse just contact me.