IPG records first-half growth despite higher wage and real estate costs
Interpublic Group (IPG), the holding company of agencies including McCann, Acxiom and FCB, recorded a net revenue increase of 9.6% in the first half of 2022. Summarizing the financial results published today (July 21), chief executive officer Philippe Krakowsky hailed “a strong second quarter and first half” building on years of “our industry-leading performance.”
IPG has released its financial results for the last six months / The Drum
However, the company’s operating margins fell slightly, and it held guidance to investors in the face of “economic uncertainty.” IPG expects to see 6% organic growth over the course of the year.
What do the results show?
IPG pulled in $2.38bn over the second quarter (an increase of 4.7% on 2021) and $4.60bn over the first half of the year – an increase of 7.1% on the same period of 2021.
Its earnings before interest, tax and amortization (EBITA) for the second quarter came to $370.1m and $643.7m for the entire half, representing an EBITA margin of 14%. That’s lower than the 15.6% seen in 2021.
Operating costs rose significantly for IPG; real estate and “other direct expenses” rose to 14.7% of net revenue, while labor costs rose 9.6% in the last six months. The company’s staff cost ratio – its wage bill and all other related labor expenses – amounted to 68.5%, up from 67% in 2021. Across the group, IPG paid out less in bonuses than in 2021, with incentives accounting for 4.2% of net revenue in the first half – down from 5.4% in the same period last year.
The holding company’s cash reserves have fallen by over a billion dollars since the end of last year, down from $3.3bn to $1.9bn; its net debt is largely unchanged, at $2.95bn. Some of that cash went on a share repurchase program, which cost almost $150m.
Which areas of the business performed best?
In a slide deck released to investors this morning, IPG experienced 8.3% and 8.8% organic growth in the US and Latin America respectively, alongside 8.3% growth in Europe. The UK alone grew 4.4%, while its Asia Pacific territories collectively saw organic growth of 4.8%.
IPG doesn’t release statistics on the revenue brought in by specific agency groups or networks under its umbrella, but it took the bulk of its revenue (42.8%) from ‘media, data and engagement solutions’ and 42.4% from ‘integrated advertising and creativity led solutions’ – its media and data agencies, and its creative shops respectively. ‘Specialized communications’ such as PR and comms accounted for the remainder.
In another statement, an IPG spokesperson also announced that IPG Mediabrands global chief exec Daryl Lee would be promoted to global CEO of McCann Worldgroup, while Eileen Kiernan will succeed him in his Mediabrands role (current McCann CEO Bill Koln will remain chairman).
"This combination of skills and experience, leading a strong team already in place across Worldgroup, means that Daryl is well-positioned to advance the success of the network and drive it to further achieve its ambition of being the global leader of creativity," said Krakowksy.