NEW YORK: The Interpublic Group could face a challenging year as the recession impacts the ad industry, prompting Standard & Poor's to change its credit rating from "positive" to "stable", while also praising the company for its recent transformation.
IPG posted profits of $295 million (€235m; £207m) in 2008, more than double its total from the previous year, and has undergone a dramatic turnaround under ceo Michael Roth.
However, Heather Goodchild, a credit analyst at Standard & Poor's, said the ratings agency was growing "more concerned about deterioration in the economy and demand for advertising and marketing services in 2009."
As such, she argued the "recession and its effect on client budgets could exert pressure on Interpublic's revenue, EBITDA, cash flow, and credit measures.”
She added that the company's organic revenue fell by 2.2% in the final quarter of last year, which could be an indicator of broader trends in the industry.
More positively, IPG achieved "strong business wins, organic revenue growth, EBITDA margin expansion, and credit measure gains during 2008" and the company's liquidity also "remains strong."
Similarly, Goodchild said "cost reductions since 2006 and over the course of 2008" allowed IPG to increase its operating margin and "discretionary cash flow."
Data sourced from AdWeek; additional content by WARC staff