IPG underperforms vs other groups with 0.2% fall in organic revenues

Interpublic Group has reported revenues of $2.52bn (£2.02bn) for the first quarter of the year, a fall of 1.8% on Q1 of 2022, attributing the performance to "areas of softness", most notably from clients in the tech space.

Before billable expenses – a preferred measure of performance – Q1 revenues were $2.18bn in the three months ending 31 March. It marked a decrease of 2.3%, while organic revenue decreased 0.2%. This was in contrast to the 11.5% hike in organic revenues IPG reported for the same quarter last year.

IPG, which owns the IPG Mediabrands, McCann Worldgroup and MullenLowe Group agencies, made a profit (net income) of $126m, and Ebita, before restructuring costs, was $210.8m, with a 9.7% margin on net revenue.

The results fell marginally short of Wall Street expectations, which predicted $2.19bn in adjusted revenue.

Philippe Krakowsky, IPG's chief executive, said IPG's "services and capabilities that have led our substantial multi-year growth", in particular media, healthcare and data-informed practices, "continued to perform well".

But "strong growth [was] offset by certain areas of softness, notably among marketers in the technology sector. The result was a slight decline in first quarter organic revenue."

The advertising group said it was on track to achieve its 2023 organic revenue growth target of 2-4% and "to further expand full-year margin to 16.7%".

IPG's media and data agencies, most notably IPG Mediabrands, MRM, R/GA and Huge, reported revenue before billable expenses of $960.8m, a fall of 0.7%, and organic decline of 1.3% compared with Q1 2022.

The group's integrated offering – McCann Worldgroup, IPG Health, MullenLowe Group, FCB and other domestic integrated agencies –experienced a more dramatic decline, falling 0.9% (and 4.5% organically) to $875.6m year on year.

However, there was a stronger performance among IPG's PR, sports and entertainment and experiential agencies, which include Weber Shandwick and Golin. The division reported revenues of $340.5m, an increase of 3.3% (1.2% organic) on Q1 2022.

Geographically, the UK outperformed IPG's US home territory, with revenues up 2.9% organically compared with a decline of 0.9% in the US. Latin America grew by 3.9%, Asia-Pacific was down 2.6%, continental Europe declined 4% and "all other markets grew by 9.3%.

Versus WPP, Publicis, Havas and Omnicom

IPG's results fall short of those reported by the world's other main ad groups. Earlier today, WPP announced organic growth of 2.9%, putting it ahead of Havas' 1.9% increase (on a net revenue basis); while Omnicom recorded growth of 5.2% on total revenue and Publicis Groupe reported growth of 7.1% (net revenue).

Krakowsky said the results were "consistent with our internal forecast of pacing for the full year, both overall and across each of our operating segments".

He added: "Since the start of the year, we have won a number of the industry's most competitive account reviews, encompassing a diverse set of services and client sectors, which increasingly benefits our outlook as we move further into the year. During the quarter, we also demonstrated ongoing strong expense discipline.

"We continue to expect full-year organic growth at the midpoint of our range of 2% to 4%, with fully adjusted Ebita margin of 16.7%. The calibre of our people and our offerings, coupled with strong operating discipline and financial fundamentals, position us well to continue to deliver for our clients and stakeholders, and to further enhance shareholder value."

In its previous, Q4 and full-year results, IPG reported 7% year-on-year organic growth for 2022 but said it expected agencies including R/GA and Huge to drag down its performance. R/GA had laid off 5% of its New York staff in June and closed its San Francisco office in November as part of a global restructure across geographically distributed versus office-based teams. The agency had lost between $7m and $10m in revenue following the collapse of the crypto sector.

In spite of its digital agency struggles, organic growth in 2022 was 7% year on year to $10,9bn in revenue, while Q4 organic revenues were up 3.8% to $2.99bn, little changed on the same quarter a year before.