Q3 revenue drop for WPP's PR firms but Cohn & Wolfe 'projects double-digit growth'

WPP followed its rival holding groups in announcing a dip in revenues from its PR firms in Q3, but Cohn & Wolfe was once again fĂȘted in the quarterly results, and is on course for a fourth year of double-digit organic growth.

Like-for-like revenues of £288m ($381.6 million) for the PR and public affairs division were a one per cent drop on the same period in 2016, although up 0.5 per cent on the figures reported last year.

This compares to like-for-like growth of 4.4 per cent in Q1 and 0.6 per cent in Q2, meaning revenues for the first nine month of £872m ($1.2 billion) are still up 1.3 per cent on 2016 in like-for-like terms and 10.9 per cent in reported terms.

The group's total revenues for the year to the end of September are £11.1bn ($14.6 billion), with nearly half (£5.2bn/$6.9 billion) of this coming from WPP's advertising and media arm. Like-for-likes for the group as a whole were down two per cent in the quarter and 0.9 per cent for the first nine months.

The section of the report focussing on PR and public affairs said: "Western Continental Europe, Asia Pacific and the Middle East were up strongly compared with quarter two, with North America, the United Kingdom and Latin America weaker.

"In the first nine months, there was particularly strong growth globally at Cohn & Wolfe, in social media content development at SJR, Glover Park and Ogilvy Public Relations in the United States, Buchanan in the United Kingdom and Hering Schuppener in Germany."

Not a 'PR' firm anymore?

Cohn & Wolfe, which has been highlighted as the PR division's top performer in every one of the recent results releases, is understood to be projecting organic growth of 10.4 per cent for 2017. This would be the fourth consecutive year of annual growth at the agency topping 10 per cent.

Cohn & Wolfe global CEO Donna Imperato said this result was being achieved in "one of the toughest years for public relations".

She said: "Our continuing success is driven by the nature of our business, which has evolved further into the integrated space. I don’t really think you can call us a public relations agency anymore, in terms of the way traditional marketers have always viewed our industry.

"Our talent delivers excellent creative content and is on the cusp of innovative technologies that allow a complete brand experience. And this integrated experience is getting results for our clients - and for Cohn & Wolfe."

WPP and peers

Earlier this month, Omnicom announced a dip in PR revenues of 0.4 per cent - prompting its boss to hint at changes in leadership at one of its PR firms.

The week before, it was confirmed that the PR firms within Interpublic Group's Constituency Management Group had seen a slight revenue decrease for the quarter.

The broker Numis said in analysis of WPP's results today: "After soft Q3 results from its peers, we believe the market was braced for a challenging quarter for WPP." The firm's share price this morning stood at 1,295p, the lowest level in nearly three years.

Last year, WPP's PR and public affairs division as a whole posted organic growth of 2.5 per cent across the 12 months.

Why?

The results document says that after a strong period from 2011 to 2016, the present year has been "a different kettle of fish, with top-line growth slowing across the industry".

It says: "In summary, it does seem that in the new normal of a low growth, low inflation, limited pricing power world, there is an increasing focus on cost reduction, exacerbated by a management consultant emphasis on cost reduction and the close-to-zero cost of capital funding of activist investors and zero-based budgeters.

"Although interest rates seem set to rise, they are unlikely to reach pre-Lehman levels, so these conditions will probably continue, maybe at less stressful and lower levels after one-time reductions this year, which are increasingly difficult to repeat.

"You cannot cost-cut your way to success."

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