ipg 2009 annual report

Download IPG 2009 Annual Report

Post on 18-Aug-2015




0 download

Embed Size (px)


IPG 2009 Annual Report


2 0 0 9 A N N U A L R E P O R TA LETTER FROM THE CHAIRMANTOOURSHAREHOLDERS:Wehavejust comethroughanextremelychallengingyear.The pressures that the global economic crisis placed on ourclients, across every industry and in all world regions, hadsignificant effects on their marketing budgets. For the advertisingandmarketingservicessector asawhole, thismeant that 2009was the most difficult year anyone currently active in the businesshas ever confronted.Fortunately, weenteredthisperiodaswellpreparedasourcompany has been in over a decade. For some time, managementhas been working methodically to build a sound financialfoundation for our company. We improved financial systems,peopleandcontrols, whichhasgivenusthetoolstoeffectivelymanage the business. We maintained a conservative balance sheetand significantly enhanced our financial flexibility. This approachproved out last year, as the solid framework that we now have inplace ensured stability despite the uncertainty that prevailedthroughout 2009.What is more, during the last fewyears, weve greatlystrengthened our professional offerings to meet the evolving needsof clients in an increasingly fragmented and complex mediaenvironment. We took major strategic actions to re-position assetsthat had been underperforming and as a result have seenturnarounds at a number of our major operatingunits. Wevefocused on talent successfully recruiting and developing seniorleadership across the organization. Weve continued to add digitalexpertise at all of our agencies. And we have made targetedacquisitions tosupplement our networkinemergingmarketingdisciplines and geographic regions where we see need oropportunity.Once again, developments last year, which includednotable account wins in the most contemporary marketingdisciplines, provided confirmation that the choices we have beenmaking position the company for long-term competitiveness.Above all, we remained close to our clients and stayedfocusedonmeetingtheirchangingneedsthisistheultimatedriverofsuccessinaservicebusiness.Whilewewereforcedtotakemanydifficult decisionstokeepthecompanyoncoursein2009, we did so with a view to whats best for Interpublics futureandfor our keystakeholders. Andwedidsowithout waveringfrom our core values of accountability and transparency.OVERVIEW OF RESULTSFor the full year, revenues were down10.8%organicallycomparedtothepreviousperiod. Thiswasprimarilyduetotheimpact of the recession on marketers willingness to spend.Despite these challenges, our company was profitable, as a directresult of the strong focus on cost discipline brought to bear by themanagement teams at all our agencies. Operatingincome was$341millionandoperatingmarginwas 5.7%, whileoperatingmarginexcludingtheincreaseinseveranceof$77millionfromtheprior year was6.9%. Cashflowfromoperationswas$541million for the year, which underscores our strong working capitalmanagement practices. Earnings per dilutedshare were $0.19.Following the broad-based stockmarket reversal in2008, thevalueofourstock rose 86% during 2009, which was well aheadof themarket andour peers, andwasIPGslargest percentageshare price appreciation in over 30 years.Inorder todeliver this level of performance, manytoughdecisionshadtobetakentoprotectmarginsandensurethatwewill be ready to grow profitability in step with a broader recovery.Regrettably, thismeant reducingour global workforceby11%during the course of the year. Our ability to address the full rangeTHE INTERPUBLIC GROUP OF COMPANIES 2009 ANNUAL REPORT 1ofourcostbasearoundtheworlddemonstratessoundoperatingcontrol in a very challenging environment. At the same time, wewere able to reduce debt, extend our maturity profile, add a newcredit facility and increase our cash position. Together, these stepsfurther enhance our liquidityandwill allowus tocontinuetoreduce debt from the ongoing cash flow of the business and cash-on-hand, whichshouldhelptofurther improvethecompanyscredit ratings.Aswegotopress, wearebeginningtoseesignsthat theworst of the impact of the recession on our business is behind us.In the last quarter of 2009, we posted sequential improvement inour organic revenue performance relative to the previous sixmonths. Clients are looking forward and re-focusing on theirbrandsastheyheadintothenewyear. Aseconomicconditionsstabilize,webelievethatweshouldseeimprovementduringthecourse of 2010. We therefore find ourselves in a strong position torecoup much of the dramatic margin progress made from 2006 to2008 and then to build on that momentum in the years to come.We see these goals as readily achievable.BEST-IN-CLASSOFFERINGDespite the economic challenges, our focus never wavered oncontinuing to deliver the most powerful and diverse range ofprofessional offeringsinthemarketplace. Wemustkeepevolvingthe business by further transforming our talent base and migratingto new competencies, and realigning certain of our agencies. It wasthereforegratifyingtoseeIPGsrecent strategicmoves, andouragencies best-in-class capabilities, being acknowledged in themarketplace. In 2009, IPG companies were honored by many of themost prestigious awards our industry has to offer. Our overallperformanceinthisrespect wasoutstandingamongthemarketingservices holding companies. Equally notable was the fact it includedrepresentation from across the full range of our portfolio.The Martin Agency, R/GAand UMswept the AdweekAgency of the Year awards in the US Creative, US Media andDigitalcategories. MartinandUMalsoappearedontheAdAgeA-List,alongwithDraftfcbandWeberShandwick,oneoftheveryfewtimesaPRagencyhasevermadethelist. R/GAwasnamed Digital Agency of the Decade by Adweek. Golin Harriswas PRWeeks Large Agency Of The Year and WeberShandwick was recognized by The Holmes Report as Global PRAgencyof theYear.McCannbecamethefirst agencyevertowinaGrandPrixat CanneswithacampaigncreatedinChina.Deutsch, Gotham and HUGE featured in Ad Ages list of up-and-comingagencies. Crains recognizedIDMedia as one of theBest Companies toWorkFor inNewYork, while Draftfcbearned the same distinction in Chicago, where it enjoys a dominantmarketposition.Whilein2009,UMwonaslewofmajormediaagencyawards, theInitiativenetworkhaddonesothepreviousyear. This combination is why Media Post named our Mediabrandsunit as the Media Holding Company of the Year for 2009.Thesearejustthehighlightsofaverylonglistbuttheyclearlydemonstratethehighstandardofworkbeingdonebysomanyofouragenciesandourterrificpeople, aroundtheworld.Theseaccoladesalsoshowthat weareverymuchinthegamewhenit comestothecompetitivenessofourtotal offering. Itswhy we will continue to be included in all major industry accountreviews andhowwell buildonrecent momentuminthenewbusiness arena. Lookingacross our portfolioof agencies, it isclear that we are well-positioned to growwhen an economicrecovery does take hold.KEYAGENCYHIGHLIGHTSFull-year2009 performance at Draftfcb was exceptional, onboth the top and bottom line, further validating the move we madetocreateamodernglobalagencythatbringstogethermarketingaccountability and creativity in a media-neutral model. Theagencyspowerful healthcareofferingalsoplayedanimportantrole inDraftfcbs success. We sawcontinuedimprovement inother areas of the business that we have been focused on, such asMediabrands. Not only are the Initiative and UM offerings strong,butwearealsolaunchingnewdigitally-drivencapabilities,suchas the Cadreon ad exchange, Geomentum, a newhyper-localmediaandmarketingagencyandtheglobal rollout of RepriseMedia, a leading search marketing specialist.Loweonceagainperformedwell withitsmajorclients. Atmid-year, the agency welcomed a newglobal CEO. We alsoadded a dynamic North American hub to the network by aligningDeutschwithLowe inthe USandCanada. This combinationshouldprovide bothagencies withthe abilitytoparticipateinmore multinational new business opportunities. McCannWorldgroup is a top-tier player in delivering best-in-classcommunications tools andresources totheworlds largest andmost complex clients. In 2009, its operating units McCannErickson Advertising, MRM Worldwide and MomentumWorldwidecontinuedtodeliver highlyinnovativeandeffectivemarketing programs. And in early 2010, we announced a smoothmanagementsuccessionatWorldgroupthatwillensureMcCanncan capitalize on the dynamic changes taking place in media andmarketing.Our PRagencies fromthe global networks to majornational agenciesandspecialistsinpublicaffairs, entertainment2 THE INTERPUBLIC GROUP OF COMPANIES 2009 ANNUAL REPORTand lifestyle marketing delivered industry-leading work to theirclients, includinggrowingdigital capabilities inareas suchassocialmediaandwordofmouthmarketing.Thisiswhatallowsthemtoconsistentlygainshareandoutperformtheirpeers. OurUS independents, particularly The Martin Agency and HillHolliday, also posted very strong results in spite of the economicchallenges, asdidour outstandingdigital specialistsR/GAandHUGE.DOING WHATS RIGHTDespite the significant economic downturn, our company andour people remained committed to contributing to thecommunitiesinwhichwework, aswell astoasystematicandstructuredapproachtoachievinggreater levelsof diversityandinclusion at our companies. We believe that this type of concerted,long-term approach is the only way to achieve the lasting culturechange that we seek across the organization.As manyof youknow, IPGwas the first global holdingcompany in our industry to establish a dedicated diversitydepartment and hire a Director of Diversity & Inclusion. Our D&Iprogramscontinuetoleadourpeergroup.Theyincludeacross-agencyCEODiversityCouncil, employeeresourcegroups thatinvolve thousands of employees fromall of our companies,various internship and fellowship programs, online employeetrainingandarangeofsponsorships and partnerships, as well asinitiatives to track and increase spending with third partyminority-owned vendors. We are the only holding company in ourindustry that ties diversity goals directly to the incentivecompensation of our senior agency and corporate leadersh