Stagwell’s Mark Penn says job cuts now over as US growth falls at holding company

The company has made over 900 redundancies since the beginning of the year in pursuit of efficiency savings. Chief financial officer Frank Lanuto described that cost-cutting scheme as “decisive measures to reduce costs to align with our revenue… in the face of continued sector-wide headwinds.”

Chairman Mark Penn blamed the performance on a “number of curveballs,” including low tech spending and industrial action.

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“Tech companies engaged in mass firings and cutbacks, which adversely affected our digital transformation business. A banking crisis that knocked out the First Republic Bank (a significant client), a B2B recession as clients held back marketing and digital projects fearing of recession that was always around the corner, rising interest rates, an auto strike that froze auto marketing, a writers’ strike in Hollywood kept down our entertainment research business,” he told investors.

Despite declines in organic net revenue (-4%), Penn suggested the firm would soon return to growth. “Just about all of those negative factors are in retreat,” he predicted. The most significant decline in organic growth was in the US; the country accounts for almost 80% of Stagwell’s income, but growth fell 9.9% in comparison with 2022 (and -8% for the year-to-date).

International markets were more positive; the firm recorded 12.2% growth in the UK and has seen an increase in activity through its Singapore businesses.

“Cost-cutting” at the company has seen it reduce its global headcount of 13,000 by 7%. Speaking to The Drum, Penn said there won’t be any further job cuts this year. “I think I called the bottom right. That’s true in terms of what we’re doing efficiency-wise; now we’re just trying to keep making the back office more efficient so that we are the right size in terms of staffing.”

He says it won’t affect the company’s long-term growth. “We think that we’ve been, you know, judicious in the way we trim back. We’re always in a good position to add to the labor force over time, but we think we’re at the right size for growth at the moment,” he says.

Hours before it released its earnings report, Stagwell announced the acquisition of social creative shop Movers & Shakers for $15m in cash and shares.

“It’s a great shop that really brings core earned social media experiences,” said Penn. “We’ve got the greatest Superbowl makers, but we’ve also got the greatest TikTok filmmakers. Having both is really what clients are looking for.”

Last week, it also offloaded ConcentricLife in an auction sale to consultancy and marketing group Accenture for $245m in cash.

Penn said he was unconcerned to be selling part of Stagwell’s business to a competitor. “I always say, if you sell something, you should sell it for the money,” he said, adding that the company was interested in growing revenue from tech, CPG and consumer brands rather than pharmaceuticals and healthcare, ConcentricLife’s specialist area.

“We had an auction process and, strategically, [Accenture] is keenly interested in the area. I had a lot of experience with prescription drugs at Burson-Marsteller [a PR firm where Penn was CEO] and to me… it’s a bit of a specialty area that we were unlikely to invest to scale in. I’d rather keep investing to scale generally, both internationally and in digital transformation.”