Interpublic Group reported Thursday that its second-quarter revenue climbed 8% to $1.74 billion, with a 31% boost in net income to $108.9 million.
But organic revenue growth, which excludes acquisitions and divestitures and is viewed by the industry as a critical metric for assessing performance, lagged behind key holding company competitors in the quarter. IPG said that second-quarter organic growth was up 4.7% during the period.
By comparison, Publicis Groupe last week said its second-quarter organic growth was up 7.6% companywide, while Omnicom recently reported 7.2% organic growth for the same period.
"Our costs and revenue fell out of step" in the period, IPG chairman and CEO Michael Roth told analysts on an earnings call Thursday morning. He said the company would be focused on correcting that in the second half of the year, and that he was confident the company would meet its full-year financial targets of between 4% and 5% organic growth overall with operating margins of 9.5%.
Operating profits for the second quarter were $176 million or about $26 million short of the company's goal, said Roth.
June was a particularly soft month, Roth told analysts.
He cited two events that were a drag on the company's financial performance, including the loss of some auto business (Chevrolet) and the winding down of the 2010 U.S. Census assignment. Company executives also noted some client spending and revenue shortfalls outside the U.S.
The technology and telecom sectors were also softer than anticipated, which is significant because they account for about 20% of IPG's business. "It's a big sector for us and it's not falling out of bed," Roth stressed.
IPG said first-half 2011 revenue totaled $3.22 billion -- up 9% -- while net income quadrupled to $55.7 million versus the same period a year ago. Organic revenue growth companywide for the first six months was 6.8%, and was more in line with the performance of competitors for the first six months of the year. Publicis reported 7.1% first-half organic growth and Omnicom recorded a gain of 6.2%.
In his comments to analysts, Roth gave shout outs to Mediabrands, the holding company's media management arm, and agency Draftfcb for strong performances during the quarter. McCann WorldGroup, he suggested, was still a work in progress, but taking the steps it needs to get back on track. "I'm pleased with the direction they're heading in," he said of McCann.
While the fourth quarter tends to be the strongest for the ad industry because clients spend more then, Roth did note that the debt ceiling fight in Washington and concerns about the global economy were unpredictable "overhangs" that could impact the second half of the year. "But clients are telling us they realize they still have to invest in their brands," he said.