IPG follows ad network rivals with return to growth as clients boost spend

Chief executive IPG Philippe Krakowsky noted that Q1 is typically IPG’s smallest seasonal quarter, though he said he was encouraged by its clients’ strategic changes.

“Return to organic revenue growth is a sign that our clients have begun to pivot to an investment mindset as they look to build their brands and grow their businesses in line with the broader economic recovery,” he said.

IPG’s results: a breakdown

• IPG’s financial success was largely predicated on having cut costs by shrinking salary expenses by 4% and eliminating 1500 roles.

• Krakowsky acknowledged the changes over the course of 2020 had laid the groundwork for the results: “Our return to growth, coupled with the benefits of strategic restructuring actions taken last year, and certain variable expenses that remain at very low levels, led to outstanding margin performance this quarter.”

• He also told investors that the group’s performance was helped by the elimination of many costs, including business travel due to the pandemic.

• Krakowsky conceded that following the uncertainty of 2020, IPG’s conversations with clients have focused on returning spend and level of interests to pro-pandemic levels.

• Krakowsky consequently believes IPG can achieve between 5 to 6% organic growth over the course of 2021.

• Krakowsky noted that, in line with competitors, IPG saw strong growth from the media, data and technology sectors. That growth was particularly strong in Europe, reaching an 12.4% year-on-year increase across the continent – and he singled out McCann Worldgroup’s activities as being a key driver.

• Other categories contributing to the growth included food and beverages, healthcare and financial services. The UK grew only 3.4% organically, however.

• Conversely, events and sports marketing was a notable source of negative growth for the company, again in line with other holding companies.

• IPG’s chief financial officer Ellen Johnson stated: “We grew in every international region, which is a notable improvement from Q4. Continental Europe grew 12.4% with increases in every major national market, including Spain, Germany, Italy and France, driven by increased spend from existing clients with double-digit growth.”

• Johnson states that IPG saw strong gains in Australia and Singapore, while China and India’s revenues declined with particularly strong results across Mexico, Colombia and Argentina. She also said there was “notably strong performance in the Middle East”.

Return to organic growth

• Krakowsky noted that Q1 is typically IPG’s smallest seasonal quarter, though he was encouraged by its clients’ strategic changes.

• IPG is also bullish about the performance of its creative solutions, as Krakowsky said: “We’re increasingly seeing the amounts of time people spend online, picking up content that's engaging, informative, entertaining, or some combination of all three, and that’s what makes the creative side of our business so vital.”

• He also noted that IPG is investing in data tools in anticipation of further changes to user data and privacy, noting that regulatory changes are something to be adapted to rather than influenced.

• “We’ve been developing a data infrastructure that underpins the full portfolio of our agencies, and deliver solutions to a broad range of business problems through what we call the open architecture model.”

• Net income was $91.7m over Q1. IPG said that with tone of business and visibility improved, and sustained public health and macro recovery, it should be positioned to deliver full-year 2021 organic growth of 5.0% to 6.0% and adjusted EBITA margin of approximately 15.5%.