Interpublic Group of Cos. said the coronavirus pandemic continued to affect business in the fourth quarter of 2020 and create uncertainty as it rethinks its structure for the year ahead.
“As you’d expect, those results continue to reflect the effect of the pandemic, which has had widely varying impact on our businesses and clients,” said Philippe Krakowsky, chief executive of the advertising conglomerate, during a call to discuss the company’s earnings, released Wednesday.
The company’s events shops, which are typically strong performers in the fourth quarter, were hit hard due to restrictions on public gatherings, said Mr. Krakowsky, who succeeded Michael Roth as CEO on Jan. 1. Health care was a top-performing category for the company, on the other hand, particularly in the U.S., said Mr. Krakowsky.
IPG reported net sales of $8 billion in 2020, a 6.5% decrease compared with the previous year. The net sales metric strips out billable expenses.
Organic net revenue, a measure that strips out currency effects, acquisitions and disposals, fell 4.8% for the year.
In the fourth quarter, net sales decreased 6.1% to $2.28 billion year-over-year. Organic revenue decreased 5.4% in the quarter, missing analyst expectations of 4.7%, according to FactSet.
IPG said it expects to return to organic growth over the course of 2021, though Mr. Krakowsky warned that the company’s visibility remains challenged.
Marketers aren’t pulling spending back as much as they did in the initial shock of the pandemic, Mr. Krakowsky added during the earnings call. But many advertisers are rethinking their strategies and remain cautious, making it more difficult for the advertising agent giant to predict their spending in the year ahead, he said.
IPG, whose portfolio includes agency groups McCann Worldgroup, FCB and IPG Mediabrands, shed light on its restructuring efforts as part of a plan to reduce expenses in the long term.
Global head count was roughly 50,200 at the end of the year, down 7.6% from a year earlier, as a result of restructuring moves, regular severance and attrition, and business dispositions, said Ellen Johnson, chief financial officer at IPG.
The company is also moving to a workplace strategy with an increased role for working from home and less need for real estate, Mr. Krakowsky said.
Last year’s restructuring actions are expected to yield annual operating expense reductions in the range of $160 million, he said.
Adjusted earnings in the fourth quarter were $0.86 per diluted share, down from $0.88 a year ago.
U.S. organic revenue decreased 1.8% in the quarter, beating expectations of a 3.67% dip, according to FactSet. In international markets, organic revenue dropped 10.5% in the quarter.
IPG’s stock was down 8% at $24.17 in late-morning trade.
Write to Alexandra Bruell at [email protected]
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