Print Published 24th Aug 2016, 19:22

The Global Greats 2016

globeWPP, Omnicom Group and Publicis Groupe consolidated their substantial lead over competitors in 2015, accounting between them for almost 57% of all the revenue generated by the 30 largest marketing groups in the world. This is one of the highlights in the annual review of publicly listed global marketing groups “The Global Greats 2016” compiled by Marketing Services Financial Intelligence, copies of which are available free to subscribers (see below).

“There is clear daylight between that trio and the second tier of Interpublic, database marketing agency Alliance Data Systems and Dentsu”, the report added.  “Trailing even further behind were Havas and Hakuhodo.”

revenue & profit 2016

Coinciding with the publication today of WPP’s results for the first half of 2016, the report said that WPP not only outperformed all-comers with its revenue last year, but also it earned the biggest post-tax profit and improved its operating profit margin to 15.5% from 15% a year earlier.

The average annual revenue growth recorded by the 30 surveyed groups was 9.7%, but the biggest growth rate of 52.6% was recorded by one of the smallest companies – the US based digital advertisement placement software provider Tube Mogul.  Criteo, another newcomer to the survey from digital arena, chalked up a 32.6% growth rate.

According to the research, the overall growth in revenue did not lead to improved staff utilisation as might have been expected.  The ratio of staff costs to revenue of companies in this latest survey was 63.2%, compared with 63.4% for the same companies in the previous period and unchanged from the 63.2% reported for the companies in last year’s survey.

The failure to convert increased revenue into increased profit was reflected in a fall in the operating profit margin of 0.2 percentage points to 13.2%.

Among companies that improved their reported operating profit margin contrary to the overall downward trend, were Next Fifteen Communications Group, Communisis, Endurance International Group and M&C Saatchi.  With the exception of Endurance International, in each case the improvement reflected a bounce-back after incurring abnormal costs in the previous year.

According to the report’s editor Bob Willott, the most salutary finding to be found in this year’s survey is that, despite increasing revenue by 9.7% and increasing operating profits by 8%, the residual post-tax profit rose by only 5.4%.  Why was that?  “Put simply, the operating profit margin slipped slightly and finance costs rose by 11.7%.”

More than one third of all companies included in the survey reported a post-tax loss for the latest year. “The losses were widely distributed in geographical terms and the number of loss-making companies was not materially from the previous year”, Willott said, “but arguably there were too many of them.”