Ad firm paying back $200,000 subsidy
An Auckland-based advertising agency has agreed to pay back the wage subsidy after enjoying a faster recovery from Covid-19 than originally expected.
The move will see independent agency Special Group return the full $203,800 it received for 29 full-time employees this year.
Managing partner Michael Redwood says the agency has reached an agreement with the Ministry of Social Development to pay back the subsidy over a number of instalments.
This is not to say Special Group wasn’t affected by the impact of Covid-19.
The first lockdown saw the advertising market collapse to well below GFC levels, with most businesses reluctant to continue advertising in the face of enormous uncertainty.
Given it was unclear when businesses would resume their marketing activities, Special Group applied to receive the government assistance.
“The money from that helped us navigate our way through the early lockdown and keep our changes at an absolute minimum,” says Redwood.
The advertising market has since recovered and the latest data from research firm
SMI showed that advertising demand in October was only 11 per cent back on last year.
Special Group is so far the only New Zealand ad agency to publicly agree to pay back the wage subsidy and it’s unclear whether others will follow suit.
The fortunes of advertising agencies over 2020 have largely depended on their client base. Agencies with a higher contingent of Government clients have, for instance, fared better than those working with tourism firms or airlines. “We just felt it was the ethical thing to do because this is taxpayer money,” says Redwood. While critics have slammed the wage subsidy rules for being too lax, Redwood said they needed to be to ensure that companies gained access to the funds as quickly as possible. “It needed to be based on trust. If the rules had been too stringent [it] would have cost the country even more jobs.” Redwood says Special has been on a decent run since the first lockdown, picking up six new clients: Optus Australia, Contact Energy, Tourism NZ (domestic), Public Trust, Partners Live and Charlie’s.
The influx of new business has seen Special’s revenue exceed earlier projections and enabled the company to boost its team to around 50 full-time staff as well as few contractors, says Redwood.
Special signalled further global aspirations last month, with the launch of a branch in Los Angeles.
Returning the wage subsidy has become a contentious subject in recent months.
As listed businesses started to release their financial results, it became clear that many wage subsidy recipients were still reporting decent profits.
The first businesses to pay back the wage subsidy were the big six law firms, which by May paid back a combined $6.2 million, after facing public backlash.
Other companies to have returned the wage subsidy include Silver Fern Farms (which paid back $43.3m) Briscoe’s Group ($11.5m), Metlife Care ($6.8m), Napier Port ($2m), Comvita ($104,000) and Cannasouth ($85,000).
There have also been a few controversial hold-outs that have refused to pay back the wage subsidy despite public condemnation.
The most visible among these is The Warehouse Group, which recently reported posted a $44.5m profit in the 2020 financial year but would have been in the red if not for the $67.7m wage subsidy it received.
Fulton Hogan also faced recent scrutiny after saying it would retain its $33.3m wage subsidy, despite reporting a bumper $211m net profit and paying out $83.78m in total dividends to shareholders.