Advertising conglomerate Interpublic Group of Companies reported $1.47 billion in revenue during its most recent second quarter, a drop from the $1.84 billion it recorded during second-quarter 2008. The company’s net income dropped from $98.3 million a year ago to $31.4 million.
Interpublic’s operations are broken into two segments: The first, Integrated Agency Networks (IAN), contains a number of brands familiar to direct marketers, including Draftfcb, Lowe, McCann Worldgroup, Mediabrands and its domestic integrated agencies, and the second, Constituency Management Group (CMG), is comprised of a number of specialist marketing service offerings.
For the second quarter, IAN reported revenue of $1.25 billion, down from $1.54 billion in second-quarter 2008, and operating income of $114.5 million, a drop from the $220.6 million it recorded a year ago. As a percentage of revenue, this segment’s operating income dropped from 14.3% to 9.2%.
CMG pulled in revenue of $226.2 million, down from $297 million a year ago. The unit’s operating income fell from $25.5 million to $20.8 million – but as a percentage of revenue it increased from 8.6% to 9.2%.
In documents filed with the Securities and Exchange Commission, Interpublic noted that General Motors, one of its largest clients, had filed for Chapter 11 bankruptcy protection in June and completed its reorganization in July.
“We did not incur any charges related to outstanding amounts due from GM during the second quarter of 2009 as a result of the bankruptcy proceedings, and we are continuing to provide advertising services to GM,” the company stated in its SEC filings.
Interpublic’s results come on the heels of last week’s earnings from Omnicom Group. Omnicom reported a second-quarter revenue drop, from $3.48 billion a year ago to $2.87 billion. The company’s net income fell from $307 million to $233.4 million.
At Omnicom, the falloff was attributed to several industries, according to an earnings conference call. John Wren, the company’s president and CEO, said its automotive activity was “down more than we had anticipated in part because of the reduction caused by the Chrysler bankruptcy,” according to a transcript from Seeking Alpha.
The company’s auto sector revenue was down 30% and its sports business was off 40%, executive VP and CFO Randall Weisenburger said during the call.
Wren said that the company’s recruitment business “remains under pressure” and its not-for-profit segment showed a decline, reflecting a drop in charitable activities.
All that said, “I believe that the top-line pressure has stabilized and while top-line growth will still take several quarters to achieve, we expect modest economic growth going into 2010,” Wren added.
Weisenberger noted that Omnicom’s brand advertising activity made up 44.6% of its revenue, and marketing services accounted for 55.4%. Brand advertising declined 15.5% during the quarter, and marketing services activity was off 18.9%.
Within its marketing services operations, CRM was down 18.7%, largely due to softness in the sports marketing and not-for-profit activity.
The Analyst’s Take: A second glance at the operating and net profit numbers for both companies reveals that Interpublic’s operating income for the most recent quarter was 6.6% of revenue, down from 10.9% a year ago, and its net income was 2.1%, a drop from 5.4% in second quarter 2009. In comparison, Omnicom’s operating profit for the most recent quarter was 12.1% of revenue, off from 13% a year ago, and its net income was 7.7% of revenue, a drop from 8.6%.
