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IPG organic revenues rise 6.5%, operating profit jumps 16.9% in first nine months of 2015

IPG organic revenues rise 6.5%, operating profit jumps 16.9% in first nine months of 2015

Author | exchange4media News Service | Friday, Oct 23,2015 8:32 AM

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IPG organic revenues rise 6.5%, operating profit jumps 16.9% in first nine months of 2015

IPG has announced strong third quarter and first nine months 2015 results. Third quarter 2015 revenue was $1.87 billion, compared to $1.84 billion in the third quarter of 2014, with an organic revenue increase of 7.1% compared to the prior-year period. This was comprised of an organic increase of 7.1% in the U.S. and 7.1% internationally.

For the first nine months of 2015, revenue was $5.42 billion, compared to $5.33 billion in the first nine months of 2014, with an organic revenue increase of 6.5% compared to the prior-year period. This was comprised of an organic revenue increase of 7.0% in the U.S. and 5.9% internationally.

Operating income in the third quarter of 2015 was $191.9 million, compared to operating income of $171.3 million in 2014. Operating margin was 10.3% for the third quarter of 2015, compared to 9.3% in 2014.

For the first nine months of 2015, operating income was $415.5 million, compared to operating income of $355.4 million in 2014. Operating margin was 7.7% for the first nine months of 2015, compared to 6.7% for the first nine months of 2014.

Third quarter results include a non-operating pre-tax loss of $38 million on the sales of businesses, which is chiefly non-cash. This amount includes losses on completed dispositions and the classification of certain assets as held for sale.

Excluding the impact of the loss on sales of businesses recorded during the quarter, net income available to IPG common stockholders was $110.2 million and diluted earnings per share was $0.27. This compares to net income available to IPG common stockholders a year ago of $89.7 million, or $0.21 per basic and diluted share.

Including the non-operating loss on sales of businesses, third quarter 2015 net income available to IPG common stockholders was $74.9 million, resulting in earnings of $0.18 per basic and diluted share.

For the first nine months of 2015, net income available to IPG common stockholders was $194.3 million, resulting in earnings of $0.47 per basic and diluted share. Excluding the impact of the loss on sales of businesses recorded during the third quarter, diluted earnings per share was $0.55, and net income available to IPG common stockholders was $229.6 million. This compares to net income available to IPG common stockholders of a year ago of $168.2 million, or $0.40 per basic share and $0.39 per diluted share. Excluding the impact of the early extinguishment of the company's 6.25% Senior Unsecured Notes due 2014, diluted earnings per share was $0.41.

A company statement said, “We are pleased to continue reporting strong results in our organic revenue growth and margin progress. Contributions to this performance came from across the portfolio – in terms of agencies, offerings, geography and client categories, all fueled by the outstanding creativity, insights and digital expertise that we have embedded throughout the group,” said Michael I. Roth, Interpublic’s Chairman and CEO. “Our commitment to incubating new skills, developing new products and services, and investing in new technology has allowed us to stay highly relevant in today’s digital world. This gives us confidence that our offerings will remain vital to marketers as they seek to navigate the increasingly complex consumer and media landscape. Our focus on our best-in-class offerings and continued cost discipline, combined with our company’s financial strength and robust capital return programs, will continue to be a source of significant value creation. In light of the very strong performance to date through the third quarter, we believe we are on track to exceed 5% organic revenue growth for 2015, above our previous target of 4-5%, and that we are well-positioned to deliver 100 basis points of operating margin improvement, the high end of our targeted range. As always, our focus will be on the caliber of our people, the success of our clients and on further enhancing shareholder value.”

Revenue of $1.87 billion in the third quarter of 2015 increased 1.3% compared with the same period in 2014. During the quarter, the effect of foreign currency translation was negative 5.9%, the impact of net acquisitions was positive 0.1%, and the resulting organic revenue increase was 7.1%.

Revenue of $5.42 billion in the first nine months of 2015 increased 1.6% compared with the first nine months of 2014. During the first nine months of 2015, the effect of foreign currency translation was negative 5.4%, the impact of net acquisitions was positive 0.5%, and the resulting organic revenue increase was 6.5%.

Total operating expenses grew 0.2% compared to revenue growth of 1.3% during the third quarter of 2015.

During the third quarter of 2015, salaries and related expenses were $1.20 billion, an increase of 0.6% compared to the same period in 2014.

During the first nine months of 2015, salaries and related expenses were $3.62 billion, an increase of 1.9% compared to the same period in 2014.

Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 64.4% in the third quarter of 2015 compared to 64.9% in the same period in 2014, and was 66.9% in the first nine months of 2015 compared to 66.7% in the same period in 2014.

During the third quarter of 2015, office and general expenses were $471.4 million, a decrease of 0.7% compared to the same period in 2014.

During the first nine months of 2015, office and general expenses were $1.38 billion, a decrease of 2.9% compared to the same period in 2014.

Office and general expenses were 25.3% of total revenue in the third quarter of 2015 compared to 25.8% in the same period in 2014, and were 25.5% in the first nine months of 2015 compared to 26.7% in the same period in 2014.

Net interest expense of $15.7 million increased by $2.5 million, or 18.9%, in the third quarter of 2015 compared to the same period in 2014. For the first nine months of 2015, net interest expense of $44.7 million increased by $1.5 million, or 3.5%, compared to the same period in 2014.

Other expense, net was $37.2 million and $36.4 million in the third quarter and first nine months of 2015, respectively, driven by $38 million of losses recorded during the third quarter on sales of businesses and the classification of certain assets as held for sale.

The income tax provision in the third quarter of 2015 was $61.1 million on income before income taxes of $139.0 million, compared to a provision of $65.0 million on income before income taxes of $157.5 million in the same period in 2014. The income tax provision in the first nine months of 2015 was $137.4 million on income before income taxes of $334.4 million, compared to a provision of $128.6 million on income before income taxes of $302.1 million in the same period in 2014. The effective income tax rate for the third quarter of 2015 was 44.0%, compared to 41.3% for the same period in 2014. The effective income tax rate for the first nine months of 2015 was 41.1%, compared to 42.6% for the same period in 2014.

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