• STW Communications Group
• Website: www.stwgroup.com.au

Industry:

Media

Fiscal Year-End:

Dec 09

SGN has three operations: 1) 67% interest in Singleton Ogilvy & Mather (SOM), a full-service advertising agency; 2) 49% interest in J Walter Thompson, also a full-service agency, acquired in January 2002; and 3) diversified marketing companies encompassing direct marketing, PR, ethnic communications and sports marketing. It divested its 20.35% interest in SCTV, the #3 rating Indonesian TV network in 2005.

John Singleton Advertising (JSA) was established by John Singleton in 1985. JSA was listed in 1994. In 1996, the listed entity became Singleton Group (SGN) with JSA as a wholly owned subsidiary. In 1998, as part of a strategy to align SGN's advertising business with a global partner, JSA was merged with the Australian and NZ operations of Ogilvy & Mather to form Singleton Oglilvy & Mather (SOM) (66.67%). In February 2002, it acquired a 49% interest in J Walter Thompson in Australia and NZ.

SOM operates in the advertising and marketing industries. It is characterised as competitive and low-margin. There is aggressive pitching for new accounts. Many agencies are branches of major international agencies and tend to be loss-making. Industry margins are in the low single digits. SOM and JWT are SGN's leading advertising agencies, with a primarily fee-based model (rather than commissions) and high margins.

SGN has several differentiating factors: 1) fee-based revenue model (rather than commissions). About 70% of revenue is fee-based. In turn, revenue and earnings do not fluctuate significantly when ad market spend increases or decreases; 2) 30%+ margins for SOM with high 20% margins for JWT; and 3) ability to retain key clients.

SOM's major accounts include Myer, Telstra, Qantas, American Express, IBM, KFC and NSW Lotteries. About 70% of revenue is derived from Australian-based clients. JWT's key client is Ford. In contrast to SOM, about 70% of revenue is from JWT's international client base. Key advertising agency competitors include George Patterson Bates, Clemenger, Photon (also DDB and Young & Rubicam).