Polansky: Interpublic PR firms see 'slight decrease' in Q3 revenue

Weber Shandwick's CEO said he saw pressure on CPG budgets across the Constituency Management Group portfolio. His firm experienced a slight organic and as-reported revenue drop in Q3.

NEW YORK: The PR firms within Interpublic Group’s Constituency Management Group posted a slight revenue decrease in the third quarter of 2017 on both an as-reported and organic basis, Weber Shandwick CEO Andy Polansky said Tuesday.

Year-to-date revenue was up slightly on both an organic and as-reported basis, he added. Firms across the CMG portfolio have seen an uptick in new business activity, particularly at Weber, Golin, and DeVries. The account wins should have a positive impact in the fourth quarter of 2018, Polansky said.

The PR firms in CMG are Weber, Golin, DeVries Global, Current, Creation, and the Axis Agency. The unit also includes marketing specialist firms such as Jack Morton, FutureBrand, and Octagon.

CMG reported an organic revenue drop of 5% in the quarter to $382.4 million. Excluding the organic change in pass-through revenues, CMG saw an organic revenue drop of 1.7% in Q3.

Weber Shandwick, the largest PR firm in the group, experienced a slight organic and as-reported revenue drop in Q3, compared to mid-single-digit organic growth in the third quarter of 2016.

Third-quarter performance at Weber was affected by lower revenue growth in North America and Latin America, which was partially offset by strong performance in Europe and Asia. Weber’s as-reported and organic revenues were flat year-to-date.

"Healthcare and our corporate practice performed particularly well and the strength of Weber’s digital offering continues to be a differentiator, and we continue to bolster our capabilities in data and analytics," said Polansky.

Polansky noted that he saw pressure on CPG budgets across the CMG portfolio. Spending by some of Weber’s largest consumer education campaigns for the U.S. government was also down.

"While we continue to see a challenging environment this year, the increase in new business activity has us feeling a bit more optimistic," said Polansky. "Companies continue to turn to PR firms to help with digital engagement and content marketing strategies, but also for advice in what is an increasingly complex business environment."

Interpublic’s Integrated Agency Networks division, which consists mostly of its creative agencies such as McCann, FCB, and MullenLowe Group, reported 2% organic revenue growth in the third quarter to $1.5 billion.

The holding company as a whole reported organic revenue growth of 0.5% in Q3 to $1.9 billion, compared with the third quarter of last year. Operating income was up 5.3% in the quarter to $219.1 million, and net income increased 12.1% to $148.8 million. The company’s revenue and earnings numbers missed analysts’ expectations, according to Nasdaq.

Interpublic cut its annual forecast for organic revenue growth on Tuesday to 1% to 2% for 2017, down from 3% to 4%, as overseas clients cut back on marketing spending, according to Reuters.

Organic revenue growth was 1.3% in the U.S. but down 0.7% internationally. Organic revenue was positive in the U.K. (3%), Continental Europe (0.4%), and all other markets (3.4%), but dropped in Asia-Pacific (2.1%) and Latin America (9.9%).

Pivotal Research analyst Brian Wieser said in a memo that "overall, we think the underlying growth that IPG is experiencing is probably slightly better than the industry’s average."

"The quarter represents a continuation of trends that have been negatively impacting the industry, given weakness among the largest marketers in the economy and the application of zero-based budgeting among many of those same marketers," he said in a memo. "We also think that enhanced contract scrutiny is having an effect on all agency holding companies in the wake of increased awareness of contract terms that allowed agencies to generate revenues that were previously not fully understood by their clients."

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