IPG: Economy, Account Losses Drive 3% Revenue Decline, But 'Positive' 2012 Predicted

Michael-RothInterpublic Group CEO Michael Roth told investors and analysts Friday that the combination of account losses and client concerns about the economy contributed to the company’s 3% decline in worldwide revenue to $1.67 billion in the third quarter and a more than 5% drop in the U.S. to $940 million.

As a result, Roth said the company was cutting its projection for full-year organic growth (ORG) -- a key performance indicator for the industry that excludes acquisitions, divestitures and currency fluctuations -- to 1% from the 3% that the company was anticipating it would achieve in July. Back then, Roth told investors and analysts that “the tone of business remains sound.” On the Friday call, he focused on client worries amid economic uncertainty.

But Roth also said IPG was paying strict attention to costs, which combined with continued solid growth in faster-growth emerging markets will help deliver an overall “positive” year in 2012.

IPG delivered a third-quarter organic revenue decline of nearly 1% worldwide. The decline was much sharper in the U.S.: down 5.4%. For the first nine months, IPG’s worldwide ORG was 0.8%, the lowest among holding companies reporting third-quarter results. A year ago, IPG was on the high end of the organic growth spectrum: 8.7% for Q3 and 7.5% for the first nine months.

For full-year 2011, IPG reported ORG of 6.1%. By comparison, Roth said Friday the company hopes to achieve 1% ORG for all of 2012. But even that’s not a certainty, he said on the conference call, given all the questions surrounding the economy.



“Q4 will be key,” Roth said -- and particularly December, when a lot of project work usually kicks in to drive holiday sales. But Roth said the company will not have a good sense of how strong the quarter will be until late November or early December.

“This year has proven to be more challenging on revenue than anticipated,” Roth said, adding: “The quality of our offerings is sound, and we’re focused on making improvements where and when required.”

"Above all," Roth added, "our ability to help clients manage in an increasingly complex consumer and media landscape represents a significant opportunity.” Clients in particular, he noted, are intently focused on ROI and believe that the newer media, such as mobile and social platforms, will help them achieve greater efficiencies. “That’s where a lot of the action is, “ said Roth. That also explains more media agency reviews, he added. “Clients are looking for those capabilities. They want more for the same amount of money.”

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