Gideon Spanier
Oct 27, 2021

Publicis overtakes rivals to be world’s most valuable agency group

French group has surpassed Omnicom and WPP.

Publicis overtakes rivals to be world’s most valuable agency group

Publicis Groupe has overtaken Omnicom and WPP to become the world’s most valuable agency group, after performing better than its two largest rivals since the start of the pandemic.

French-based Publicis Groupe’s stock market value has risen to more than $16.3bn (€14bn/£11.8bn).

That compares with Omnicom, previously the biggest agency group, on $15.1bn (€13bn/£11bn) and WPP on $15.4bn (€13.3bn/£11.2bn).

Arthur Sadoun, chairman and chief executive of Publicis Groupe, has reported strong revenue growth in both Q2 and Q3 2021 – ahead of 2019 levels and accelerating in the most recent quarter – as he said investments in data unit Epsilon and digital transformation arm Sapient paid off.

The French group’s share price is up more than 150% to €56 since a nadir at the start of the pandemic, when it sank to €22.

Interpublic, the smallest of the big four agency groups, has also been closing the gap on all of its rivals as its stock market value has climbed to $14.4bn (€12.4bn/£10.5bn).

Ian Whittaker, founder and managing director of Liberty Sky Advisors and author of Campaign’s Investor View column, said: “Publicis Groupe has beaten expectations for several quarters in a row.

“There is an increasing view they got it right with the Sapient and Epsilon deals – and that Interpublic did with Acxiom [its data unit which was acquired in 2018].”

Whittaker added that Publicis Groupe may also be benefitting from “an element of investors thinking Vivendi may bid for the asset to merge with Havas”, following Vivendi’s windfall from the Universal Music stock market flotation.

He continued: “Historically, the US agencies were always more highly rated but that has changed, given Omnicom’s problems on its events side [during the pandemic]. Interpublic has done well but is starting from a smaller position.

“As for WPP, I think UK investors want to see sustained performance before they are confident of the WPP recovery story.”

Some industry observers said Publicis Groupe’s valuation relative to its peers may have benefitted in part from its lack of share buybacks.

Both WPP and Omnicom have repurchased shares this year, which reduces the number of shares in issue and their stock market value, although Whittaker played down the impact of buybacks on their valuations.

WPP has also made a series of disposals, notably a majority stake in Kantar, to reduce debt, and Omnicom sold its barter business Icon International this year.

Many agency stock prices remain below pre-pandemic levels – IPG is the exception

WPP was the most valuable agency group for many years, peaking at £24bn at the start of 2017, but the stock price slumped by a third to £16bn during Sir Martin Sorrell’s final year in charge as revenues went into reverse.

Revenues continued to decline following his exit in April 2018 and Omnicom overtook WPP by stock market value in October 2018.

WPP, which will report Q3 results on 28 October, has performed better than Omnicom since the start of the pandemic but Publicis Groupe has overtaken both of them in valuation terms since the Q2 2021 results season.

At S4 Capital’s results last month, Sorrell, who regularly criticises his old company, pointed out WPP’s valuation had been “surpassed by Publicis for the first time”.

Interpublic, the smallest of the big four agency groups, has been the best performer of all the groups since before the start of the pandemic.

Its revenue growth in Q2 and Q3 2021 was faster than Publicis Groupe on a two-year “stack” basis versus 2019.

Interpublic also has a higher price-to-earnings ratio than all of its established rivals – a measure of future growth that links share price to profits.

Sorrell and other critics, such as David Jones, the founder of You & Mr Jones and former global chief executive of Havas, claim the big agency holding company model is unwieldy and no longer fit for purpose as clients want more agile, flexible agency partners.

Many agency stocks remain below pre-pandemic levels. WPP’s share price of £9.50 is still half of its 2017 peak of £19, Publicis Groupe’s stock price of €56 is about a quarter off its 2015 high of above €75, and Omnicom’s share price of $71 is about 17% below its 2016 peak of $86.

However, Interpublic’s stock price, which has climbed above $36, is at its highest level in two decades since it suffered major financial problems.

WPP employs about 100,000 globally, Publicis Groupe 80,000, Omnicom 65,000 and Interpublic 54,000.

Campaign UK

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