IPG Boosts Net Income for Q4, Full-Year ’08

NEW YORK Interpublic Group today said it more than doubled its 2008 net income applicable to common shareholders to $265 million, up from $131 million the previous year.

The improvement was fueled by revenue growth of more than 6 percent. Between 2007 and 2008, the holding company’s revenue rose from $6.55 billion to $6.96 billion, IPG said.

IPG also hit its previously stated operating margin goal of 8.5 to 9 percent for the year, achieving a margin of 8.5 percent. In addition, organic revenue grew at peer-levels, with a 3.8 percent year-to-year increase.

For the fourth quarter, organic revenue declined 2 percent compared to the like period in 2007 — illustrating the falloff in business that the entire sector has experienced since late last year.

Gross revenue also declined in Q4, to $1.90 billion from $1.98 billion in the year-before period. Net income for the quarter applicable to common shareholders, however, grew from $162.7 million in 2007 to $209.8 million. (Click here for IPG’s complete financials.)

“While meeting our 2008 financial objectives is gratifying, the latter part of the fourth quarter and the early part of 2009 have begun to show the negative effect that the broader economic situation is having on the marketing services sector,” said IPG CEO Michael Roth, in a statement.

He continued: “Our long-standing conservative approach to financial and balance sheet management has us well-positioned for these volatile times. Given that it’s unclear how pronounced or lasting the downturn will be, we must continue to remain focused on the basics: delivering value to our clients and ensuring that we continue to manage to our margins. These are the fundamentals that will allow us to come through this difficult period and ensure future growth.”

During an hour-long conference call with industry analysts, Roth and CFO Frank Mergenthaler said IPG would focus on cost control in 2009, in hopes of maintaining its operating margin. That could translate into more layoffs and cutting spending on temporary labor, and incentives.

“We’ll have to keep looking at all those measures closely because managing the business very conservatively is going to be key as we move through this period of uncertainty,” Roth said.

Improving the 8.5 percent margin, however, will be difficult without revenue growth, Mergenthaler said. Many client media spending forecasters are predicting flat to declining spending in 2009.

Roth described clients as being “very measured and cautious in their approach to all spending. We’re seeing them go out to the media owners, looking to drive the best possible deals and get maximum value for their money. They’re looking at agency budgets carefully as well.”

The automotive sector has slashed spending considerably in recent months and IPG’s largest global client is General Motors. In December, an analyst estimated that GM supplied more than 5 percent of IPG’s total revenue, or roughly $325 million.

In a break with past practice, Roth today provided a snapshot of how much GM currently owes IPG for either work completed or work in progress. “Right now, our total exposure to General Motors, including our work in process, is roughly $150 million,” Roth said. He did not provide an estimate of IPG’s annual revenue from GM.


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