IPG Revs Dip, Organic Growth Up Globally
Interpublic Group reported today a 1.4% drop in second-quarter revenue to $1.7 billion, while net income was down 3% to $105 million.
IPG’s organic revenue
growth (ORG), which excludes acquisitions and divestitures and which is seen as a key industry performance metric, was up just 0.8%. The company attributed the low growth to account losses and client
In the U.S., ORG dropped 3.2%. Results were far better outside the U.S., where the company’s ORG rose 6% in the quarter, with double-digit gains in both the Asia-Pacific and Latin America regions.
By comparison, Publicis Groupe last week said its second-quarter organic growth was up a slightly better 1.6% in Q2, while Omnicom earlier reported a stronger 5.1% organic growth for the same period.
For the first six months of 2012, IPG revenue was essentially flat at $3.2 billion, while net income grew 7% to just under $60 million. First-half ORG was 1.7%.
Commenting on results during a conference call with financial analysts, IPG CEO Michael Roth said that the company faced an anticipated 5% revenue shortfall going into the quarter, due primarily to account losses in 2011, notably S.C. Johnson and Microsoft. Those headwinds, he added, “more than offset sound U.S. performance" in Q2 of this year.
Other contributing factors included spending cutbacks in the healthcare sector, which accounts for about 15% of IPG’s total revenue base. That sector, Roth noted, is being buffeted industrywide by patent expirations of highly profitable drugs and worries about potential new regulations that could restrict current marketing practices. Retail sector revenues were also lower.
Despite the bumpy second quarter, Roth said the company remained confident that it would hit its target of 3% organic growth for the full year, with a stronger second-half performance. “Overall, our pipeline remains solid and the revenue our agencies need to convert in the back half of the year” in order to hit their targets “is largely consistent with trends from past years.”
The “tone of business remains sound,” Roth said, “though the overall macroeconomic climate will require continued vigilance and caution.”
Roth also said the company was “well-positioned” to achieve the previously stated goal of improving full-year operating profit margin by a half percentage point. The company’s first-half margin increased by three-tenths of a point, while the margin for the previous 12 months reached 9.9%, the highest level of 12-month profitability the company has achieved in a decade.
And while the main IPG agency networks posted combined negative organic growth for the quarter, the holding company’s Constituency Management Group, which includes PR shops like Weber Shandwick, events unit Octagon and other specialty marketing services companies, turned in ORG of 8%.
Categories that grew included automotive and financial services, with new or added business from clients such as Bank of America, Ernst & Young, Unilever, General Motors and MillerCoors.