Interpublic’s results disappoint

Thursday, 27 July 2017 00:05 - - {{hitsCtrl.values.hits}}

Reuters: Advertising company Interpublic Group on Tuesday reported surprisingly weak quarterly results, hurt by tepid client spending in the United States.

Shares of New York-based Interpublic, one of the world’s “Big Four” advertising companies, plunged as much as 16% after the company also said it expects annual organic revenue growth at the low end of its forecast.

“Client spending in the quarter reflected increased caution, but we don’t see evidence of a broad-based economic downturn,” Interpublic Chief Executive Michael Roth said in a statement.

Ad companies in recent years have benefited from explosive growth in digital advertising, particularly in social media ad campaigns, at the expense of traditional print and TV ads.

But Interpublic lost business from the telecom and financial services industries in what it called an unusually soft quarter for the digital business, contributing to the first quarterly decline in its US revenue in over two years.

International sales also slipped, declining 3.3% to $724.4 million.

“(The results) were really surprisingly negative,” Pivotal Research Group analyst Brian Wieser said.

Client spending was dragged down by political gridlock and macroeconomic uncertainty, and also due to cost cuts by consumer goods industry clients, Wieser said, pointing to Anglo-Dutch conglomerate Unilever, which slashed spending on ad agencies by 17% in the first half of the year.

Last week, Omnicom Group Inc, a rival “Big Four” ad firm, also warned of gridlock in Washington causing businesses to pause investments.

Interpublic, which owns agencies such as MullenLowe and McCann and counts Google, Microsoft and Coca-Cola among its clients, reported lower-than-expected profit and revenue in the second quarter ended June 30.

Net income fell to $94.7 million, or 24 cents per share, from $156.9 million, or 38 cents per share, a year earlier.

Excluding one-time items, Interpublic earned 27 cents per share, missing analysts’ average estimate of 34 cents, according to Thomson Reuters I/B/E/S.

Interpublic said it would sharpen its focus on reining in costs to boost profit.

Total revenue slipped 1.7% to $1.88 billion in the second quarter, missing analysts’ estimates of $1.95 billion.

Interpublic said it now expects 2017 organic revenue growth at the lower end of its 3% to 4% forecast.