IPG could be on the block as third quarter business stalls

The holding company malaise has well and truly hit Interpublic with third quarter revenue down one per cent, organic revenue up just 0.5 per cent – adding up to a first nine months revenue decrease of 0.7 per cent with organic revenue for the period up 1.1 per cent. Interpublic earned $5.54bn in the first nine months of 2017 compared to $5.58bn in the same period of 2016.

Third quarter operating income (profit) was $219.1 million with an operating margin of 11.5%. The US, IPG’s biggest market, performed better than the rest with organic revenue up 1.3 per cent. Interpublic is now forecasting organic revenue growth (excluding acquisitions) of between one and two per cent.

IPG agencies include McCann, FCB, R/GA and MediaBrands (UM and Initiative).

CEO Michael Roth (below) says: “Results in the quarter reflect strong operating margin expansion, although organic revenue was negatively impacted by broader trends that are being felt throughout much of the industry. Our agencies and our talent across the portfolio remain among the best in their respective disciplines, which gives us confidence in the long-term competitiveness of our offerings and our client-centric service model.

“Domestic performance in the quarter also demonstrates that the business is fundamentally sound in our largest geographic market. That said, client caution and the macro environment require that we adjust our outlook for this year, to margin expansion of 40 basis points, with one to two percent organic revenue growth. Combined with the strength of our balance sheet and our proven commitment to capital returns, delivering on these targets will allow us to enhance shareholder value.”

Well it might but the shareholders of all the big holding companies (WPP, Omnicom, Publicis, Dentsu alongside IPG) will be getting mighty restless as these companies flatline at best. Increasing shareholder returns will mean cutting costs and operations or selling. Valued at just $8bn, IPG is looking highly vulnerable.

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About Stephen Foster

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Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.