IPG Posts Small Revenue Gains, U.S. Up Nearly 5%

Interpublic Group posted a 2.4% gain in revenue for the second quarter to $1.76 billion, with a 19% drop in net income to $82.8 million. Organic growth for the period was 2.2%.

For the first six months, the company reported revenues of $3.3 billion, roughly flat from the prior year period with a net income drop of 45% to $26.5 million. Organic growth for the first half was 2.3%.

Company CEO Michael Roth said the firm remains confident that it will achieve full-year organic revenue growth of between 2% and 3% and profit margin improvement of half a percentage point.

IPG’s organic growth -- a key performance metric for the ad industry -- was lower than both Publicis Groupe and Omnicom Group, which reported results earlier in the week. Publicis reported organic growth of 5% for the second quarter and 3.2% for the first half. Omnicom reported organic growth of 2.8% for both periods.

Roth told analysts on a conference call Friday morning that Europe proved to be a surprisingly challenging region with an 8% organic revenue decline in the second quarter. Roth cited “decreased spend across the region by multinational and local clients, particularly in June, which had weaker-than-expected performance.” Expectations were not high, as the company was not anticipating a rebound in the region, which has endured recessionary conditions for much of the past year.

Company executives also noted that profitability was impacted because it hired a couple hundred new staffers to service several big new pieces of business. In the second quarter, client wins included Cadillac, Amazon Media and Zurich Financial. The full revenue impact of those wins will kick in during the second half of the year, Roth said.

“We will be very focused on costs and keeping the back door closed,” Roth said, by which he meant keeping existing clients happy while pursuing new business opportunities. Other than the previously reported Pizza Hut review, where the Martin Agency is defending, Roth said none of the company’s current major clients were in review.

In the U.S., the growth picture was brighter with a nearly 5% gain in overall revenues and 3.3% organic growth. Overall international organic growth was less than 1%, although Latin America grew by double digits and the Asia-Pacific region was up 4.5%.

By sector, auto and transportation, consumer products, food and beverage and health care turned in stronger performances, while retail and tech and telecommunications were relatively weaker.

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