Interpublic hit by downturn

29 July 2009

NEW YORK: Interpublic Group, the marketing services conglomerate, saw organic revenues fall by 10.5% in the first half of 2009, with total revenues also declining by 15.7%, to $2.80 billion (€2.0bn; £1.7bn), over the same period.

The marketing services conglomerate has undergone a transformation in recent times, as chairman/ceo Michael Roth set about re-branding what he argued had become known as "the 'beleaguered' IPG."

While the company returned to profitability before the downturn, the impact of the recession meant it reported a loss of $39.2m over the opening six months of this year, compared with a profit of $18.2m in H1 2008.

This included an 11.5% contraction in US revenues, to $1.6bn, and a 20.9% decline in international sales, to $1.2bn, figures that read 14.5% and 25.7% in Q2 respectively.

In the quarter to June 30, Interpublic's total reported revenues slid to $1.47bn, from $1.84bn, overall, with like-for-like figures also down 14.5%. 

IPG stated that around 4% of the decrease in organic revenues was attributable to clients in the automotive sector – led by General Motors – as well as a drop off in events marketing.

During the last nine months, the New York-based corporation has reduced its headcount by around 4,100 employees, or 9% of its total workforce, resulting in $120m worth of severance payments.

One result of this has been that salaries and expenses have declined by 9.4% for 2009 to date, although this improvement was said to have been "outweighed by revenue reductions due primarily to the global recession."

"Our second quarter results reflect the impact of the global economic downturn on our industry," said Roth.

"Clients continue to be cautious when it comes to committing resources in such an uncertain environment. It's going to take some time to get back to the growth," he added.

"We believe that our company's organic revenue result for the second half of 2009 should be consistent with the year-to-date performance."

More positively, Roth argued "strong expense management" and the fact IPG's agencies are "active in major pitches at the local and global level" will "position us for significantly improved profitability in step with an economic recovery."

Recently, Publicis Groupe reported its total revenues fell by just 0.8%, to €2.2bn, in H1, while Omnicom saw sales slide by 15.8% in this period.

Data sourced from Interpublic Group; additional content by WARC staff