Number Crunching

Financial reporting season has begun. WPP, Omnicom and Publicis have revealed their fiscal 2001 results in the last two weeks; Interpublic, Grey and Havas will soon do the same. It’s the one time of year when the business side of the ad industry is guaranteed center stage. So it’s an opportune time for the financial report featured in this issue.

London-based WPP, one of the first to release its numbers, reported a 35 percent gain in revenue in 2001. However, excluding acquisitions made during the year, revenue was down 3 percent. Omnicom, meanwhile, continued to show impressive gains. Organic revenue growth, excluding acquisitions, was 8.5 percent—in a year when the industry declined by about 5 percent. IPG’s figures are expected this week.

As the results are revealed, our report looks at the CFOs who are helping holding companies navigate the choppiest conditions the industry has seen in recent memory. The role of the CFO has grown steadily in importance during the past 10 years as the holding companies have become more international and more aggressive with acquisitions, completing them sometimes at the rate of one per week. CFOs have become true financial managers, no longer regarded as mere “bean counters.”

Paul Richardson, whose background is in tax and treasury, joined WPP in late 1992. Noreen O’Leary reports on his operating style and his relationship to WPP chief Martin Sorrell. Randy Weisenburger joined New York-based Omnicom in January 1999, replacing longtime CFO Fred Meyer, who retired. He discusses Omnicom’s financial philosophy and what prompted him to accept John Wren’s offer and leave Wasserstein Perella. At IPG, Sean Orr is a new member of John Dooner’s team. The man who replaced Gene Beard as CFO in June 1999 talks about settling in at the world’s largest holding company as the industry went south.

Apart from revenue, the biggest determinant of an agency’s financial performance is employee expense. Since staff costs consume more than half of gross income (and the space to house them another 15-20 percent), we’ve examined compensation practices by discipline and by region. While top executives, at least at the publicly owned companies, are compelled to reveal their pay packages—which we present for the most recently available year—we polled regional agencies, which don’t have to report, to find out where salaries stand. We enlisted accounting firm Arthur Andersen to help conduct our Salary Survey. We have seen only aggregated data; the identities of individual agencies remain a secret.

What is not secret is how well agency stocks performed during the past decade. In “Beating the Odds,” we outline how ad agency shareholders enjoyed a considerable bounty over the last 10 years. On average, agency stocks more than doubled the performance of the broad market averages. Top performers like Omnicom and WPP returned a dollar in capital gains for every dime invested.

Finally, as the big three thrived, four “mini” holding companies have struggled to make a name for themselves. We explore the players behind Maxxcom, Panoramic Communications, Envoy Communications Group and Wolf Group to learn what makes them—and their companies