Interpublic Reports Dip In Q4 and 2012 Revenue, Higher Q4 Net Income

U.S. Revenue Fell by 2.2% in 2012 While International Was Up 0.8%

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Interpublic Group of Cos. reported a slight dip in full-year revenue and a drop in net income for 2012, compared to 2011. The company reported a boost in fourth-quarter earnings, but near-flat revenue during the period.

Fourth-quarter revenue dropped 0.4% to $2.06 billion, from $2.07 billion in 2011. Full-year 2012 revenue was $6.96 billion, down 0.8% from $7.01 billion in 2011.

Net income attributable to Interpublic was $446.7 million in 2012, down from $532.3 million in 2011.

U.S. revenue for the year was down 2.2%, while international revenue was up 0.8%, thanks to strong growth in Asia Pacific (13%), Latin America (1.3%) and the U.K. (6%).

Despite the revenue dips, fourth-quarter profits were up. Net income attributable to Interpublic rose to $316.2 million in the quarter, vs. $261.9 million in the same period a year earlier. Operating margin was 19.9% for the fourth quarter of 2012, compared to 18.6% in 2011. Organic revenue was also up 0.7% for the full year in 2012, and 0.4% for the fourth quarter.

"2012 challenged us in terms of growth, due in large part to account losses suffered in 2011," the company said in a statement. However, it expressed its confidence in organic revenue growth in 2013 by raising the quarterly dividend by 25% and authorizing an additional $300 million in share repurchase.

On the earnings call, Mr. Roth responded to a question about IPG's financial outlook discussed during its Investor Day in March 2011. He said, "Given reductions in revenue growth, we've moved out a year in terms of achieving our target. That's where we're heading and we'll get there. It may take us a year or so longer but we're focused on getting there."

During the event in 2011, Chief Financial Officer Frank Mergenthaler had announced that the company is targeting 2014 to reach its operating margin objective of 13%.

In 2013, Mr. Roth said that the company expects to achieve "organic revenue growth performance commensurate with our peers," with growth between 2% and 3%. The outlook is in large part based on a solid operating margin of 9.8% for the full year, and 19.9% in the fourth quarter.

During the full year and fourth quarter of 2012, the company recorded a pre-tax gain of $93.6 million related to the sale of the company's remaining holdings in Facebook.

This past November, IPG's Harris Diamond replaced Nick Brien as CEO of McCann Worldgroup. Global media agency network Mediabrands, which Mr. Roth highlighted as a key growth brand, also recently announced a number of senior-level management changes.

The Integrated Agency Networks group, which is composed of McCann Worldgroup, DraftFCB, Lowe & Partners and IPG Mediabrands, experienced a decrease in revenue of 2.8%. IAN accounts for the bulk of IPG's revenue. Mr. Roth mentioned that DraftFCB will announce a new CEO at the end of the first quarter.

On the flip side, the Constituency Management Group, which includes PR agencies Weber Shandwick and GolinHarris, and brand experience agency Jack Morton Worldwide, achieved 9.3% revenue growth in 2012, with strong performance across the PR branding and sports marketing categories, said Mr. Roth. He also called out standalone digital specialists Huge and R/GA.

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