Art & Commerce




September Song Acquisitions, new-account wins and a robust business environment helped the four largest publicly owned U.S.-based advertising shops post double-digit percentage revenue gains in the September quarter. Without exception, the increased revenue drove profits higher. And there’s more good news: These companies’ margins are still expanding, which means that even though costs are going up, they’re rising slower than commission and fee income. If management can keep that bit of magic alive in the December period, profit results could be especially good, since the fourth quarter is almost always the year’s biggest in terms of volume. Margins may expand beyond their old highs, especially at companies with a large share of below-the-line services. Low interest rates are also helping profitability, and some companies are seeing an upturn in key European markets, especially France, where business has been sluggish. The picture, of course, is never picture perfect. One worry is the outlook in Asia Pacific, where distressed financial systems are straining important economies, such as Korea’s. If the Asian contagion takes root in other markets, the profit outlook could turn grim. –Alan Gottesman (westendal pobox.com) is principal of West End Consulting.

THE GOTTESMAN FILE
The big four U.S. ad shops all reported gains in revenue and earnings per share for the September 1997 quarter.
……….Revenue…..Increase*…..EPS…..Increase*
…..Grey…..$201.8…..10.6%…..4.28…..15.4%
…..Interpublic…..$701.3…..26.4%…..0.28…..21.7%
…..Omnicom…..$746.8…..18.2%…..0.51…..21.4%
…..True North…..$161.5…..28.4%…..0.28…..7.7%
…..Source: SEC filings. Revenue in millions of dollars.
…..*Gains are relative to the September 1996 quarter.