Interpublic's results are decidedly gloomier than that of its US rival Omnicom Group, which managed to shrug off signs of the advertising slump by posting an 11% increase in net profits.
Interpublic was harder hit because of its disproportionate exposure to the US advertising market compared with its rivals. The company said it saw little hope for a turnaround in the second quarter and that it was predicting full-year revenue in 2002 could be less than last year.
Despite wins from clients such as MCI Worldcom and American Airlines, the group was hard hit by the high-profile loss of major clients such as PepsiCo.
The results come as no surprise. Earlier this year, analysts slashed earnings amid fears that Interpublic's first-half revenues would fall short of expectations.
John J Dooner, the Interpublic chairman and CEO, said: "As previously reported, we expected that first-half revenue would remain challenged and that profits would therefore be achieved largely by means of cost savings and improved financial discipline. That said, we are seeing growing momentum in the area of new business, where we posted $745m of net wins, up from $223m in the previous quarter."
Earnings declined by more than 12% in the first quarter to $66.7m from $76.5m in 2001. Operating income in the first quarter fell 9% to $140.1m. Operating costs during the period, excluding goodwill and amortisation, declined 14% or $200.2m.
Interpublic reported earnings per share of $0.18, compared with a net loss of $0.08 per share last time.
However, the group, which owns McCann-Erickson and Weber Shandwick, the world's biggest PR company, said savings from its restructuring programme were coming in ahead of plan.
According to Sean Orr, Interpublic's chief financial officer: "With our continuing focus on costs and barring a further economic downturn, we expect to deliver double-digit earnings-per-share growth despite the harsh industry climate."
US revenues, which represents 58% of the company's portfolio, declined 18% in the quarter to $830.1m. International revenue declined 10% in the first quarter to $590m. On a constant currency basis, international revenues fell by 8%.
Advertising and media, which represents 59% of the company's revenue, fell 17% in the quarter to $843.5m, compared with $1.02bn in the 2001 quarter.
All other marketing activities, which represent 41% of the company's revenue, declined 12% in the quarter to $576.6m. Specifically, marketing communications revenue declined 14% to $384.8m.
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