The ad downturn and the economic fallout of September 11 significantly dented the respective financial performances of Interpublic Group and Grey Global Group, both of which unveiled results Tuesday.
Interpublic – the biggest agency group in the world – posted a Q3 loss of $477.5 million, tumbling from a $90.8m profit twelve months earlier.
Revenue sank from $1.7 billion to $1.61bn, with around $35m of sales lost due to the disruptions to business caused by September’s devastation. Its US operations suffered most, posting a 16% drop in revenues from $1.07bn to $900.4m; in contrast, non-US revenues rose 6% to $705.3m.
Net new business for the quarter climbed 6%, with $771.7m of additional billings from clients such as Pfizer/Pharmacia and Sirius Satellite Radio. However, IPG also lost substantial slices of business from PepsiCo, AT&T and DaimlerChrysler – the latter thought to have deprived the group of $33.9m in revenues.
Cutbacks by IPG triggered increased severance and lease termination charges plus other costs – from $26.7m in Q3 2000 to $592.8m. But it expects to save $300m a year from the scaling back. Without restructuring and other costs, IPG’s net income stood at 15 cents a share – two cents higher than analysts’ projections.
Grey Global – parent of the Grey Worldwide network – managed to post a net income of $1.5m, though this was 71% down on the $5.14m a year earlier.
Gross billings and revenue both slid 2% year-on-year: billings from $2.01m to $1.97m; revenue from $301.8m to $296m. As with Interpublic, the drop was steepest in the US, where revenues tumbled 11%, leading to layoffs at its American operations.
Grey blamed the results on the generally poor economy, aggravated by the attacks on New York and Washington, all of which hurt its direct marketing, public relations and corporate communications divisions.
News sources: Wall Street Journal; New York Times