Outlook - IPG's plans to outperform the advertising market in 2021

Chris Pash
By Chris Pash | 12 January 2021
Michael Roth speaking to UBS

Interpublic Group (IPG), something of a market darling among stock exchange listed advertising companies, expects to again outperform its peers in 2021.

Michael Roth, the former CEO and now executive chair of IPG, in a briefing to investment bank UBS, says the pandemic was an opportunity to focus and reposition the business.

He says the industry has been misunderstood but not all advertising companies are the same.

“I think the ability of our industry to pivot and, and, deal with this pandemic has proven that the industry is more resilient,” he told UBS in December.

“In particular IPG, because of its go-to-market strategy, its talent, and the various assets and capabilities that we have under an open architecture model, is an example of why we're all not the same. Our performance proves that.

“I think where everyone got this wrong was the fact that we are not a dinosaur, we are relevant to the marketplace right now.

“If you look at the history of IPG throughout the last five years, we outperformed our sector.”

Several market analysts have been recommending IPG as a way to benefit from the upswing in ad spend in 2021. 

IPG’s share price has regained the ground lost from the pandemic trading at around $US25, a long way from the $US12.53 during the depths of the coronavirus crisis in March.

In its latest reported results, IPG in October posted net revenue of $US1.95 billion for the third quarter, down 5.3% but better than analyst expectations.

Like many advertising companies, Roth says it was unclear what clients were going to do in the early stages of this pandemic.

“Everyone basically had no idea what was going to happen,” he says.

The June quarter in 2020 was a disaster because clients weren't spending, he says. “They were hunkering down, they were bolstering their balance sheet. They wanted to protect their margins. So spending obviously was cut back and that had an impact on us.”

However, that turned around with clients realising they had to be in the market.

And IPG restructured.

“Year to date, we've taken some significant restructuring actions to get our cost profile.We've taken $US110 million to $130 million out (permanent savings),” says Roth.

Headcount is down 5% to 7% and office space has been cut back and more work from home. “We're not anticipating bringing all those people back,” he says

“We are well-positioned from a cost profile to continue to expand margin and as well as obviously our capabilities ... using our data analytics and insights, coupled with our creative capability to drive revenue.”

He expects to continue to outperform the advertising sector and expand margin and revenue.

“I'm comfortable very much with respect to our competitive positioning and the value that we bring to our clients in the marketplace,” he says.

“We're excited about the opportunities for 2021.”

Roth handed over the role of CEO to Philippe Krakowsky on January 1.

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