STW revenues rise but Mike Connaghan admits there has not been enough new business



The STW Communications Group has delivered improved revenues for the half year ended June 30, with CEO Michael Connaghan telling a public briefing the group needs to focus on winning more business in the second half of the financial year.

The part WPP-owned holding group – whose dozens of agencies include Ikon Communications, Ogilvy, Howorth, TCO, Tongue and JWT – reported revenues rose by 5.3 per cent in the first half of the year to $188.3m while EBITDA – earnings before interest, depreciation, taxation and amortisation-  rose by 2.2 per cent to $36.5m.

CEO Mike Connaghan told a public briefing: “We are facing a very challenging market, that’s clear. That said, many parts of our businesses are performing very well. If we can improve our new business win record in the second half, which we must do, I believe we can still have a really strong second half.

“Our new business performance has not been up to our expectations, we’ve actually lost a couple of accounts and there’s been a couple of pitches out there which we would have hoped to have won which we didn’t win. That is something we need to address, there is plenty of opportunity in the pipeline for us in the second half.

“There’s always swings and roundabouts in new business wins and losses, that’s the nature of our game. What we’ve been very good at for a long time is making sure that we win more than our fair share, and I’m absolutely not trying to sugarcoat the reality of our first half this year, we won our fair share but we didn’t win more than our fair share, it’s something that we are addressing and we’re confident in the second half we’ll get back to our higher expectations.”

This year media agency Ikon has lost Coca-Cola and Diageo,  whilst Ogilvy is preparing to part ways with major client Vodafone, which is in the midst of a creative agency review.

“We remain optimistic for a much stronger second half, our expectation for organic growth performance and profit performance for 2014 will be marginally ahead of the prior year and with the benefit of the recently announced acquisition overall STW expect single digit growth in earnings per share and net profit after tax for the full year ending 31 December 2014,” said Connaghan.

In June STW acquired retail marketing solutions company Active Display Group.

Connaghan added: “As outlined in the 2013 full year results in February, clients are diversifying marketing and sales spend into a wider range of channels and disciplines, and we need to continually push out our services to deliver to their fast-changing needs.

“We already have strong leadership momentum in digital and data. Shopper marketing is another high growth area of our business and our acquisition of retail marketing material solutions company Active Display Group accelerates our leadership in this sector. Active Display is a perfect fit with STW’s strategy of broadening capabilities to meeting changing client needs, and enhances STW’s ability to service clients’ entire budgets. This investment helps anchor a new high growth sector for STW.”

The acquisition of Active Display Group contributed to the company’s gross debt increasing to $177.4m.

STW chief financial officer Lukas Aviani said: “Operating cash flow for the half year was $15.4m (30 June 2013: $7.2m) and after completion payments for new acquisitions STW’s net drawn debt position increased to $150.2m at 30 June 2014 (31 December 2013: $129.1m). Despite the increase in net debt, STW’s balance sheet and capital position remains in good health.”

Miranda Ward


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