Clemenger Group is facing its toughest year in the company’s 67-year history but chairman Robert Morgan has said he will not contemplate any offshore expansion to pursue growth.
The comments come with STW Group having just launched Edge Asia, its new digital advertising network, across Vietnam, Thailand, Malaysia, Singapore and Indonesia. The Paris-based Havas is also backing Host into Singapore, and now most likely San Francisco, before China.
Clemenger delivered a record net profit after tax of $35.9 million for the 2012 calendar year off revenue of $283 million, but Morgan said it was the toughest in his 15 years as chairman.
“Until this year, 2012 was the toughest I can remember and 2013 is going to be worse,” he said. “I say that in the context we still managed to increase profit but it was bloody hard going, let me tell you. The problem we’ve got is there is absolutely no growth whatsoever in any sector in nearly every discipline, so any growth you get has to be market-share growth.
“You’ve got whole categories that are in structural change and that has made it even harder. We all know what’s happened to FMCG marketers and on top of that, you have clients that have also seen no growth and are looking at maintenance of profit growth through cost reduction, including reducing agency fees.”
It was a “perfect storm” when combined with Australia finally catching up with the economic malaise facing the rest of the world, Morgan said. “Australia probably got out of 2009 and 2010 better than any other country in the world and now it’s coming home to roost. We are now really caught in the same deflationary environment that Europe and North America have been dealing with for a couple of years – so welcome to the world.”
When asked whether Clemenger was “landlocked for growth” because of the downward pressure on fees from clients and little opportunity for further diversification in other marketing services, Morgan said he still saw growth in the business this year and it would be in good shape “when the market turned”.
But he remained sceptical of the moves by STW and Host into Asia. “All the very best luck to them because they are going to need it. I don’t think Australian marketing services companies have the financial patience or depth, nor the clients that can facilitate a move in that direction in the way that the global ones can.
“You go to Asia with a client just as WPP did with Ford and IBM and whoever else, and Omnicom with Visa and Pepsi. Unless you’ve got a very big client it is terribly hard setting a shingle outside an office in Hanoi. The forebears of Clemenger were in Asia in the 1980s and we retreated because we couldn’t make it work financially.”
This article first appeared in the 17 May 2013 edition of AdNews, in print and on iPad. Click here to subscribe for more news, features and opinion.
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Clemenger: 2012 toughest year on record, 2013 worse - AdNews
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