Interpublic is Latest Holding Co to Report Disappointing Third Quarter
Interpublic reported disappointing third-quarter results but said it expects to be in a stronger position going into 2013 than it was in going into 2012.
Interpublic Group of Cos. reported a 3.2% drop in third-quarter revenue to $1.67 billion, in part because of weaker client spending. In the U.S., the drop was more pronounced, with revenue falling 5.5%. Third quarter net income was $68.7 million, down from $208.1 million a year ago.
Interpublic CEO Michael Roth said the year has proved to be a bigger challenge than expected on the revenue front, but noted the company is managing its business in a way that will eek out revenue growth for the full year. He also pointed out that Interpublic is not alone in facing challenges, as peers including WPP and Publicis also recently reported disappointing results.
"These results reflect greater caution on the part of our clients, particularly in September, headwinds from 2011 losses, and extremely challenging third quarter comparisons," said Mr. Roth. "As you recall, our industry-leading growth of 8.7% in last year's third quarter was driven by 10% growth in the U.S. and benefited from a revenue shift of $26 million from Q2 into Q3." He added that the company continues to see the impact from last year's account losses, "which was 2.5% in the quarter, most notably in the consumer goods sector. And in the U.S. that number was approximately 4%."
Mr. Roth pointed out the bright spots in the U.S., which are its media business, MediaBrands, digital agencies such as Huge and R/GA and the marketing-services agencies in its Constituency Management Group division, particularly PR firms Weber Shandwick and Golin Harris. He added that the financial and auto industry accounts are continuing to grow, while noting that , as in second quarter, "softness" persists in the retail and pharmaceutical sectors.
DraftFCB has made progress in replacing revenue from large client loses like SC Johnson, he said, and the agency is "developing its offering in digital and marketing services and effectively managing costs. ... Lowe continues to build on its leadership position with Unilever and as a top creative network focused on emerging markets."
Interpublic in the third quarter of last year saw a pre-tax gain of $132.2 million from its August sale of about half of its small stake in Facebook.