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Stagwell boss Mark Penn says recession fears overblown as group posts record revenue

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By Sam Bradley, Journalist

March 2, 2023 | 6 min read

The agency group’s president and managing partner says recession fears are overcooked as it records over 20% growth.

Mark Penn

Stagwell chief Mark Penn spoke to The Drum as the company released its full-year results

Challenger agency network Stagwell grew revenues to a record $2.7bn over the last financial year, defying predictions that a slow economy and lower consumer spending would hit agency businesses.

Stagwell, which owns agencies including 72andSunny and Forsman & Bodenfors, reported net revenues of $2.7bn – a company record – and revenue growth of 21%. It expects to achieve between 7% and 10% revenue growth over the course of the next financial year.

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Penn tells The Drum that fears of recession were overblown. “The consumer economy is strong, employment is strong, consumer [brands] continue to be strong, travel is strong, spirits are strong. Tech companies, even though they’ve had some setbacks … a lot of the economy remains strong.

“People are getting ahead of themselves. We don’t have doom and gloom yet.”

Stagwell’s earnings margin across its portfolio of agencies was 20.4% over the past year. That puts it ahead of the margins maintained by industry competitors; WPP and Publicis’s operating margins reached 14.8% and 18% respectively.

“We outperform our peers, I think significantly because we have more high-growth digital services. That puts us in a different class,” says Penn.

The company’s margin and net debt was down ahead of targets, which Penn indicates was owed partly to keeping a close eye on costs.

“We run a strong margin because we run a tight ship. We’re going to continue to hack away at central administrative costs. My philosophy is always to let the agencies hire what they need to grow and service the accounts, and try to do the back office as streamlined as possible.”

In particular, Stagwell plans to reduce its property footprint further and is seeking to recover between $4m and $5m in savings by cutting office space in Los Angeles, London and Toronto.

Though the group’s tech and communications arm has plans to release proprietary AI tools for the PR space this year, Penn doesn’t expect to see the benefits of AI-driven efficiencies for some time. “That’s going to probably take two years.”

Recruitment across the group’s agencies, though, will likely slow down over the coming year however. “We’ll hire proportional to growth. We have been super active hirers and consequently, now we’re taking a generally cautious hiring position.”

Penn and his top team have been eager to talk up Stagwell’s inclusion in more pitches and formal brand RFPs in the last year. The CEO estimates it participated in $1bn worth of pitches in 2022, but wants to push that number to $1.2bn this year, particularly outside the US.

“Now that Stagwell is at scale, our goal is to get more pitches in Europe. We have some great assets in Europe. They’ve been working individually and we’re trying to get them work together. When they work together, I think that will really achieve significant scale.”

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Acquisition activity, he indicates, would be focused on tech services and markets such as the Middle East and South America. “This is another strong quarter and a great year for Stagwell. We’re getting more and more notice out there in the marketing world for the wining combination of creativity and technology that we offer.”

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