‘Solid’ Q4 for IPG with 2021 tipped for growth

Here’s what you need to know about its full year and Q4 earnings.

Financials

• Q4 net revenue of $2.28bn, down 6.1% year-on-year from $2.43bn. Organic net revenue decrease of 5.4%. In Q2 that was 9.9%.

• It remained strong at home. Q4 organic net revenue decreased 1.8% in the US. It was 10.5% in international markets

• It made of $413.8m of savings in 2020. It expects that those cuts will result in annual savings of $160m. Staff cost ratio (total salaries and related expenses as a percentage of net revenue) was 58.9% in the fourth quarter of 2020. This is flat, comparable with 2019.

• For the full year 2020, salaries and related expenses were $5.35bn, a decrease of 4.0% compared to 2019. Late in 2020, it had planned to cut 3,000 jobs, around 10% of its workforce. It had already cut around 1,500. Such cuts were typical in the big networks, and while bonuses and benefits fell, but severance pay bit into those savings.

• 2020 net revenue was $8.06bn, compared to $8.63 billion in 2019. Organic net revenue decrease was 4.8%.

• Visibility into the full year remains “challenging” but the board expects a return to positive organic growth this year. IPG's Initiative winning the $2bn T-Mobile media business earlier this year will help that.

• Operating income for the full year 2020 was $588.4m, including restructuring charges of $413.8m, compared to $1.09bn in 2019.

• All office expenses were down 1% in the year. Real estate costs hit historically low 2015 levels.

• Billable expenses were $9.06bn, compared to $10.22bn in 2019. Travel will make up much of the savings here.

• 26% of revenue came from health care. 16% tech and telecoms. 13% financial services 10% each to food and retail, 8% both to consumer goods and auto and 9% to other. Healthcare saw the obvious surge from 22% in 2019. Financial services and auto drooped.

View from the top

• Krakowsky said the focus remains on “mitigating the impact of the health crisis on our clients, our business, and most important, our people. Their achievements have been remarkable, and I want to express our admiration for their resilience, and our appreciation for their ongoing commitment and effort“.

• He said it was a “solid quarter... under challenging conditions. [Our] performance once again should place us at the top of our sector. We continued to be disciplined with respect to expenses, proactive and strategic in our approach to structural cost actions, while simultaneously investing in our business during the year to accelerate areas of strongest opportunity and growth.”

• Any investment will be in “differentiated capabilities and forward-looking offerings”. A strong balance sheet remains the “key priority” going forward.

• Krakowsky concluded: “On top of IPG’s 2020 outperformance relative to our peer group... we expect to continue to build on our long-term record of improving profitability and sustained value creation.”

IPG’s brands include Acxiom, Craft, FCB (Foote, Cone & Belding), FutureBrand, Golin, Huge, Initiative, Jack Morton, Kinesso, MAGNA, Matterkind, McCann, Mediahub, Momentum, MRM, MullenLowe Group, Octagon, R/GA, UM and Weber Shandwick.