Strong growth in advertising and media
Advertising and Media Investment Management revenues were up almost 7% for the year in constant currencies and well over 5% like-for-like, the strongest-performing sector on this basis. In the final quarter, constant currency revenues were up almost 8% and like-for-like revenues were up well over 6%, very similar to like-for-like growth in the third quarter.
Of the Group’s advertising networks, Ogilvy & Mather, JWT and Grey performed especially well in North America in the fourth quarter, with Y&R performing strongly in the UK. However, the Group’s advertising businesses in Western Continental Europe generally remained challenged, with like-for-like revenues under pressure. Growth in the Group’s Media Investment Management businesses has been very consistent throughout the year, with constant currency revenues up almost 11% for the year and like-for-like growth of almost 10%. tenthavenue, the ‘engagement’ network focused on out-of-home media, also performed strongly in the fourth quarter, with like-for-like revenue growth up over 16%. The strong revenue growth across most of the Group’s businesses, together with good cost control, resulted in the combined headline PBIT margin of this sector improving by 0.3 margin points to 18.0%.
In 2013, Ogilvy & Mather, JWT, Y&R, Grey and United generated estimated net new business billings of £2.3 billion ($3.7 billion). GroupM (the Group’s Media Investment Management arm, which includes Mindshare, MEC, MediaCom, Maxus, GroupM Search and Xaxis), together with tenthavenue, generated estimated net new business billings of £3.2 billion ($5.1 billion).
Data Investment Management (formerly Consumer Insight) revenues grew 3% on a constant currency basis, with like-for-like revenues up well over 1%, and the second half much stronger than the first half. More significantly, gross margin (or net sales) was up over 2% like-for-like, a turnaround of the trend seen in 2012. In the fourth quarter, revenues grew by almost 4% on a constant currency basis, with gross margin up 4%. On a like-for-like basis, revenues were up over 1% and gross margin up almost 2%. North America, Asia Pacific, Latin America, Africa and the Middle East performed well above the average in the fourth quarter, as they did for the year as a whole. The UK and Western Continental Europe were more difficult. There seems to be a growing recognition of the value of ‘real’ data businesses, rather than those that depend on third-party data. Headline PBIT margins improved 0.3 margin points to 10.3%, while headline gross margin or net sales margins (headline PBIT as a proportion of gross margin rather than revenue) also improved 0.3 margin points to 14.3%.
Although there has been marked improvement during 2013, the weakest sub-sector continues to be the custom businesses in mature markets (with North America maybe now an exception) where discretionary spending remains under review by clients. Custom businesses in faster-growth markets and syndicated and semi-syndicated businesses in all markets remain robust, with strong like-for-like revenue and gross margin or net sales growth.
Almost 35% of the Group’s 2013 revenues came from direct, digital and interactive, up over two percentage points from the previous year and growing well over 7% like-for-like
The Group’s Public Relations & Public Affairs businesses had a difficult year, particularly in North America, Continental Europe, Latin America and the Middle East. However, although revenues for the year fell by almost 1% on a constant currency basis and by almost 2% like-for-like, top-line growth returned in the fourth quarter with constant currency revenues up over 2% and like-for-like growth of over 1%. Despite careful cost management, Headline PBIT margins fell by 0.4 margin points to 14.5%.
At the Group’s Branding & Identity, Healthcare and Specialist Communications businesses (including direct, digital and interactive), constant currency revenues grew strongly at over 8% with like-for-like growth of almost 4%. Like-for-like revenue growth slipped slightly in quarter four, due primarily to slower growth in parts of the Group’s Branding & Identity and Specialist Communications businesses, but overall the second half was much stronger than the first half on a like-for-like basis. AKQA, the leading digital agency acquired in July 2012, performed particularly well with full year like-for-like revenues up over 20%, with the fourth quarter even stronger. For the sector as a whole, headline PBIT margins improved by 0.4 margin points to 14.8%.
Almost 35% of the Group’s 2013 revenues came from direct, digital and interactive, up over two percentage points from the previous year and growing well over 7% like-for-like. Marketing services comprised almost 60% of our revenues in 2013, a similar proportion to 2012.
Chapter 6 of 13