Interpublic Q4: Revenue Declines; Good News in the Details; Layoffs Still a Threat

Revenue at Interpublic Group declined 4.1 percent to $1.9 billion in Q4 2008, but that topline masked what was actually a sterling performance for IPG. BNET previously chided the company for a number of issues: its negative cashflow performance, which for three straight quarters had been in decline; and it came near the bottom of a ranking of agency networks by efficiency. This quarter, BNET takes (most of) that back.

For every dollar of operating expenses (mostly salaries), IPG got back $1.21. That's the highest it's been in more than a year -- and is now better than Omnicom, WPP (in Q3), and about the same as Publicis.

Restructuring costs -- ie layoffs -- were only $5.9 million

The company also increased its cash on hand: cash, cash equivalents and marketable securities totaled $2.27 billion, compared to $2.04 billion at the end of 2007 and $1.71 billion at the end of the third quarter of this year.

And the cashflow statement re-entered positive territory with an increase of $92.3 million for the year. If that revenue line didn't reflect the recession, these numbers would look rosy. No wonder JP Morgan says buy the stock.

BNET also called on its readers to check whether IPG's accounts receivable was getting into trouble. There are reports that strapped clients are delaying payments to agencies. But IPG showed a positive cash change of $284 million in AR for the year -- meaning that its clients are paying their bills in a timely fashion. Its accounts payable were negligible, which is good news because in 2007 and 2006 paying them off drained IPG of $221 million and $370 million in cash, respectively.

The picture is that IPG is managing its cash and operations much better than Omnicom. On the same measures, Omnicom is less efficient, has a negative cashflow position, and its accounts receivables are rising (i.e. not being promptly paid).

But don't break out the champagne yet, Interpublicans: CEO Mike Roth hinted more layoffs are on the way. Adweek:

During an hour-long conference call with industry analysts, Roth and CFO Frank Mergenthaler said IPG would focus on cost control in 2009, in hopes of maintaining its operating margin. That could translate into more layoffs and cutting spending on temporary labor, and incentives.

• See BNET's previous coverage of this topic:
• Clients Are Delaying Payments to Agencies
• Omnicom Q4: Slashing Jobs Faster Than Revenues Shrink Seems to Work
• IPG Maximizes Pain of Layoffs Through Uncertainty
• IPG to Cut Up to 2,000 Jobs; PHD Atlanta to Close
• InterPublic Loses Cash for Third Straight Quarter