IPG’s Michael Roth: we need to win the ‘pitches we don’t see’ from the consultancies

Michael Roth: IPG Q1 results are "outstanding"

IPG chief executive Michael Roth has reaffirmed his company’s investment in data and business transformation practices, telling investors he wants the holding company to grapple consultancies for “hidden” accounts, not just customary RFPs.

The company published an investor-friendly set of Q1 results this morning (26 April), dwarfing WPP’s own first quarter earnings with year-on-year organic net revenue growth of 6.2%. Mark Read’s business, by contrast, posted a like-for-like sales decline of 2.8%.

IPG tallied total growth at 13%, which included its purchase of data business Acxiom. Chief financial officer Frank Mergenthaler rebuffed analyst Michael Nathanson’s assertion that organic growth at the data business has, in fact, “slowed down a lot”, stating it was “growing consistently with our expectations”.

Roth is still taking Acxiom’s integration slow and steady and plans to only let his creative and PR agencies loose on its capabilities in the latter half of the year.

The CEO has previously highlighted Acxiom’s role in IPG’s future prospects, coupled with the business transformation divisions gathering pace in the likes of R/GA, Huge, MRM and MullenLowe Profero. Today, when asked about his thoughts on Accenture Interactive’s purchase of Droga5, he detailed his ambitions for these offerings further.

He noted that the group hasn’t “seen a lot of RFPs where we’re competing with Accenture”, but added he is aware that does not mean the Big Four are harmless to his business.

“They’re already at our clients – it’s the hidden competition that’s there,” he said. “Sometimes there’s business [clients] just give to the consultancies and not us. That’s why ... we have business transformation as an expertise that we can bring into our clients ourselves.

“It’s those pitches that we don’t get to see that, when you hear [consultancies] talking about their growth, is there. And we’re trying to get at that by expanding our business transformation piece within our agencies.”

Like Omnicom’s John Wren, Roth shrugged off the Accenture/Droga deal by highlighting that McCann had just beaten David Droga's shop to become ADT’s agency of record. He was harsher in his assessment of Publicis’ purchase of Epsilon, dubbing the French group’s track record of integration as “not exactly ... stellar”.

“We’ll deal with them in the marketplace and certainly [the acquisition] is an attempt by them to be more like us and others in this industry,” he said. “When we compete head to head, I think our results indicate our assets are better than the others.”

'I hate losing clients'

IPG’s Q1 results saw stock trading up 5.3% on the back of the results, which Roth dubbed “outstanding, especially when compared to our peers”. Revenues increased across the three months ending March 31 in all markets, with Latin America soaring to 23.8% and UK’s remaining steady at 5.7%, despite Brexit uncertainty.

On a sector basis, the strongest growth came from health care, industrials, consumer goods, financial services and retail clients. Roth highlighted a “good new business performance” in the quarter, although noted the adjusted EBITA of $104m to “address certain account losses” in the second half of 2018.

These comprised the US Army and Chrysler North America media account.

“I hate losing clients,” he said, “and we lost a number of clients at the end of the year. We’re not going to see that [repercussion] until the second half of the year. When we get to Q2 we’re going to take a hard look at that and see how the new business wins have performed – but we haven’t yet seen the impact of those client losses.”

Across the pond, WPP’s Read classed his own Q1 results this morning as “disappointing” but “in line with our budgets”. US account losses, including the likes of Ford, GSK, United Airlines and American Express, were cited as critical factors to a drop of 8.5% in like-for-like sales.

Omnicom reported organic growth of 2.5% last week. Publicis’ organic growth for Q1 was down 1.8% due to “a handful of FMCG clients” in North America cutting their ad spend.

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