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WPP AUNZ | STW Group (Australia)

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STW Group was Australia's largest homegrown marketing services group. It reclaimed that position at the end of 2011 after several years in which it was eclipsed by faster-growing challenger Photon (now Enero). Although independently owned, STW was closely associated with WPP, running the local outposts in Australia and New Zealand of three of the British marketing giant's biggest brands, J Walter Thompson, Ogilvy & Mather and Mindshare. However it also controlled a large collection of around 80 local agencies including media buyer Ikon and creative shop The Brand Agency. The STW acronym stood for Singleton Tate WPP, after group founder and local advertising legend John "Singo" Singleton, his business partner Russell Tate and WPP. Despite its size the group suffered an alarming slump in performance in 2014. That eventually led to a takeover by WPP at the end of 2015 to create what is now WPP AUNZ, combining STW's existing operations with all WPP's other agencies in that region.

Brands & Activities

In a deal that had been looking increasingly inevitable all year, STW agreed to a takeover bid from WPP at the end of 2015. Under that deal, WPP merged its wholly owned local operations in Australia, including Grey, GPY&R and other brands, into STW in return for a 61% shareholding in the enlarged group (up from under 24%). The remaining shares continue to be publicly owned, though the name of the group changed to WPP AUNZ. STW's existing operations and those of WPP in Australasia were about the same size in annual sales. Pro-forma sales for the combined business are approx A$850m (or US$620m). The merger of the two groups completed in May 2016.

Pre-merger, STW comprised around 75 separate companies offering a complete range of marketing services. The core of the group was provided by traditional advertising agencies. J Walter Thompson Australia & New Zealand and Ogilvy & Mather Australasia were both joint ventures with WPP. STW owned a minority 49% stake in JWT, but almost two-thirds of O&M. The latter, previously Singleton Ogilvy & Mather, officially dropped its founder's name from its title in 2009. Melbourne ad agency Badjar merged with local office of O&M in February 2007 to become Badjar Ogilvy. The group also controls an extensive portfolio of investments in numerous other agencies in Australia and New Zealand, most of which operate independently of one another and of the group.

Media services are handled by local arms of WPP's Mindshare and Maxus networks as well as Ikon Group, a widely admired independent acquired by STW in 2006. That agency was one of the country's fastest-growing media agencies in the late 2000s and early 2010s, before suddenly hitting a brick wall in 2013. It lost a string of important accounts over the next few years, including Vodafone, Coca-Cola and Diageo. In 2015, Ikon converted to a full service agency, absorbing STW's equally troubled creative unit Moon Communications. A newer media and strategic planning strand was launched in 2012 under the name Bohemia. That unit is independent, and WPP AUNZ has only a minority stake.

Integrated marketing is offered by Spinach and Tongue and the local office of OgilvyOne. There are also design agencies (including DesignWorks and Cornwell), specialist communications (Ogilvy Impact, Etcom and others), research companies (Added Value, AMR Interactive), public affairs and PR shops (Parker & Partners, Lawrence, Howorth Communications, Pulse and others as well as Ogilvy PR), digital agencies (DT, The White Agency) and sports and sponsorship agencies.

Until recently, STW in most cases held only a significant minority stake, usually 49%, in each of its subsidiary agencies with control retained by each company's management team. In the late 2000s, however, it changed its strategy, either acquiring full control or divesting its minority stake altogether. Numerous units left the group; others were added through acquisition or launch. Most agencies are now wholly owned.

A loss-making investment in broadcast media, in the form of Indonesia's SCTV network, was sold during 2004 to a consortium whose directors include STW founder John Singleton. In 2011, the group began to expand its marketing expertise to South East Asia with outposts in Singapore, Malaysia, Indonesia, Thailand and Vietnam. Its biggest business in these markets is digital agency Edge Asia.

Following the merger, WPP AUNZ now becomes the umbrella for all WPP's local marketing agencies.

Financials

STW reported total consolidated revenues of A$443m (US$400m) for 2014, with net profit before non-controlling interests of A$46m (US$41m). However the group was one of the weakest performers on the Australian Stock Exchange during the year, with its share price crashing to a five-year low by mid-2015.

Results for 2015 were pretty grim. Underlying net revenues were A$416m, but the net results crashed into a loss of A$52.6m, after impairments of almost A$82m.

Despite those results, it remained Australia's biggest marketing services group by some margin. It claimed 8.4% of the overall local market in 2014, while WPP's directly controlled businesses accounted for 5.4%. Publicis Groupe combined accounted for 6.0% and Omnicom for 5.7%.

The newly consolidated WPP AUNZ group reported a solid year for 2016. Net sales rose 1% on a comparable basis to A$865m (or around US$644m). advertising & media investment accounted for A$453m; brand & specialist communications for A$242m; data investment (ie Kantar) for A$107m; and PR for A$62m. Net profit rose 6% to A$87m (or US$65).

Net sales for 2017 were up 0.6% on a reported basis to A$870m, as strong growth in the main advertising and media agencies offset weakness in research, PR and specialist communications. Net profit rose 3% to A$84m.

WPP had traditionally held a stake of around 20% in STW through investment company Cavendish Square Holdings. It began increasing its holding in 2015, reaching almost 24% in Oct 2015. The STW board also included WPP finance director Paul Richardson. In December 2015, WPP agreed to take majority control of STW, folding its own separate WPP Holding Australia & New Zealand entity, into the business in return for a 61% stake in the merged group.

Background

John Singleton - universally known as "Singo" - remains Australia's highest-profile adman, even though he no longer has any direct involvement in the industry. He first came to prominence as creative director of Singleton Palmer & Strauss McAllan (or SPASM) in the 1960s, and was widely criticized by the overly self-conscious Australian media for debasing the popular image of the country. At a time when the Australian establishment was struggling to present a more refined and cultivated image, Singo championed the country's popular culture. His was the first agency to use broad Australian accents and slang (or 'Strine) in ads, instead of "Pommy" accents. The press castigated him as a "mumbling ocker", but the ads were enormously popular with the ordinary Australians whose lives they mirrored, and this success quickly generated interest from multinational agency networks.

Singleton and his partners sold SPASM to DDB in 1972 and he stayed with the agency until the late 1970s, but became increasingly unhappy with the management culture imposed by the US group. In 1977, at the age of just 36, he retired and spent several years indulging himself, as a broadcaster and even circus owner as well as a canny investor in property and media. He also developed a following in the popular press for his excessive, hard-living, hard-drinking lifestyle.

Singo returned to the industry in the early 1980s, opening John Singleton Advertising in 1984. Shortly afterwards he sold a 50% stake in the business to swashbuckling Australian financial entrepreneur Rene Rivkin, becoming part of the latter's diversified conglomerate Oilmet Holdings. The agency also became heavily involved in politics, taking charge of marketing for Australia's Labor Party. Other major wins included the KFC account in 1991, and especially Telstra in 1993. Singleton reacquired Rivkin's shares following the collapse of Oilmet, and floated his company in 1993 as John Singleton Advertising. The agency consolidated its position as one of Australia's most important shops with the capture of two more prestigious accounts, Qantas and Lion Nathan's beer portfolio.

As Singleton expanded, the local office of Ogilvy & Mather, acquired a decade earlier by WPP, was struggling. Singleton agreed a partnership with WPP's Martin Sorrell to merge the two businesses to form Singleton Ogilvy & Mather. A key factor had been O&M's win of the KFC account four years earlier in every country in the world except Australia, where it had stayed with Singleton. Other than that though Singleton had found it hard to attract other multi-national clients, so the partnership seemed to help both sides. After an uneasy start, the merged agency picked up speed in 2000 and 2001, converting O&M's local losses into a handsome profit. As a result, Singleton agreed a deal in 2001 to acquire a 49% stake in WPP's local JWT offices as well, with his right-hand man Russell Tate elevated to partner. In recognition of that deal, The Singleton Group changed its name to STW, for Singleton Tate WPP. Since then the group has pursued a policy of broadening its interest in the Australian industry through a large number of investment deals in local companies.

Russell Tate, group CEO since 1998, replaced John Singleton as executive chairman of STW in 2006, before himself retiring from active management in 2008. Singleton reduced his shareholding in the group in 2006, and cashed out his remaining shares in 2009. He has invested widely since then in racehorses and hotels and other areas, and is the largest shareholder in quoted broadcasting group Maquarie Radio.

STW CEO Michael Connaghan retained that position in the newly created WPP AUNZ. Russell Tate, previously group managing director and executive chairman, retired from active management in 2008, but remained a director and deputy chairman until 2011.

Last full revision 14th June 2016

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