It is too early to know what marketing agencies’ balance sheets will look like on 31 December, but there have been some signs that borrowing levels have stabilised. A survey published in October suggested that balance sheets of most publicly listed marketing groups appeared to have remained fairly stable during 2011 despite the gloomy economic environment, and that trend seems to have continued.
Posts By: Bob Willott
Lots of people no longer believe it is possible to keep staff costs down to no more than half an agency’s gross income. Undoubtedly it is a difficult challenge – one that is increasingly dismissed as unrealistic by those who note how a number of US agency groups seem content to spend at least 60% of income on their staff.
Anyone who thinks that businesses are easy to manage and that profits are easy to predict could learn a lesson or two from the results of two public companies in the marketing sector that reported this week.
As each week passes, we hear more gloomy outpourings about trading prospects from the major groups in the industry. Huntsworth and Dentsu joined the gloomy chorus last week, countering Maurice Lévy’s attempt to cheer us up with news of better trading in October. Even those companies that are currently on target for the year feel the need to counsel caution about their future prospects – witness Chime Communications and Levy’s warning about December.
With 86% of LBi International’s shares either already purchased or subject to irrevocable undertakings, it is hard to envisage any circumstances that would prevent Publicis concluding its takeover bid next January – provided the regulators don’t intervene.
If share incentive schemes are intended to reward staff for building bigger profits for shareholders, the Facebook scheme is an unmitigated failure. While revenues grew by 36% in the nine months to 30 September, profits have vanished completely.
Publicis Groupe’s ability to continue building revenues at a seemingly faster rate than its global competitors – reflected in its third quarter results announced today - may well have been helped by favourable currency movements – not least the decline in the euro – and aggressive investment in digital acquisitions, but the fact remains that the growth is real enough.
There is some evidence – but not a lot – that the stock market anticipates trends in economic activity, pruning back share prices when a downturn is expected and cautiously lifting those prices back upwards when better times are seen to be on the horizon.
It’s hard to believe that many of the financial results reported in the last week or so have been very positive. What happened to recession and the financial crisis that we are all supposed to be experiencing?
Few would challenge the Publicis policy of investing in digital assets in the manner pursued so energetically by chief executive Maurice Lévy. It has proved to be a good strategy so far. And, as a target, LBi has made great progress from its darker days to become a well respected business.