广告公司：行业增长放缓，但有望复苏.docxVIP

Global Research Advertising AgenciesSector growth subdued, but expected to recover Sector growth subdued in H119Sector LFL sales growth grew +0.4% in H119 vs. +1.8% in FY18. We believe four issues weighed on growth: 1) continued attrition at creative agencies (PUB called out a -260bps drag in H119, c75bps potentially from PG); 2) weakness in China (all agencies called out softness. WPP reported a -50bps drag in Q219, Dentsu a -170bps drag from China/Australia in H119); 3) a softer macro; and, 4) tough comps with H118 benefiting from the winter games and FWC. Media agency growth was however positive with WPP/OMC/IPG calling out positive growth (GroupM +ve with Xaxis +16% in H118). Evidence suggests a more positive H219 and FY20 are possibleRevised guidance (PUB/Dentsu down, IPG up) implies H219 growth of+1.1 % although this will be macro dependent. In FY20, we see a pathway to +2% growth with growth set to benefit from: 1) data asset MA (Acxiom/Epsilon; with Acxiom growing 5+%); 2) a return of large events: Olympics (Japan), Euros2020, US elections; 3) a lift in global ad spend (GroupM sees +6% in FY20 vs +3.4% in FY19, +6.9% in FY18); and, 4) reduced weight of creative agencies (WPP indicated CPG growth was mixed with Unilever +ve). Macro risk remains the biggest headwindWe believe the biggest swing factor is global macro (US is c46%, Europe/UK c28%, ROW c25%); however, we see reasons to be more optimistic: 1) UK agency revenues continue to grow (c+2-3% in H119) despite flat employee growth, weak macro and a high digital presence (c60% of UK ad spend) suggesting pricing power exists; 2) a UBS Evidence Lab survey of Glassdoor reviews indicates agency staff a re the most upbeat in 18mths while the risk of talent flight/wage growth has yet to impact margins (ex-WPP). Europeans to play catch up: Prefer WPP to PUB despite valuation gapWe expect the divergence in growth between US and European agencies to narrow as WPP/PUB return to growth and IPG (not covered) sees accou