Profits at Interpublic -- the third-largest marketing organization in the world -- fell from $3.7 million in the same period in 2006, due to severance and salary expenses and increased operating costs, among other factors.
Revenue up for period
Revenue, meanwhile, grew 7.3% to $1.56 billion in the quarter, up from $1.45 billion in the year-prior period. Interpublic's chief financial officer, Frank Mergenthaler, in a conference call with investors today attributed the boost in the U.S. largely to organic growth at McCann Worldgroup, DraftFCB, Initiative and Universal McCann, along with strong growth at Hill Holliday that was fueled by a string of recent business wins.
As part of the call, Interpublic executives said the holding company will scale back aggressive margin objectives set forth early last year to reach 10% operating margins by 2008 to between 8.5% and 9%. The reasons cited were primarily client losses and related staff reductions, as well as talent investments in the digital space.
"I'm not taking our foot of the accelerator here," said Mr. Roth, noting the company still plans to aim for double-digit growth, although 8.5%-9% is a more reasonable expectation.
Interpublic so far in 2007 has reduced head count at DraftFCB and Lowe Worldwide by more than 1,000, the bulk of which was related to Verizon's consolidation at McCann and the loss of General Motors' GMC and Saab business at Lowe, the executives said. However, employee count remains approximately flat from where it started the year, at about 43,000, due to hires in digital, public relations and direct-marketing areas at MRM, Momentum, RG/A and Weber-Shandwick.
As part of the conference call, the executives also addressed repositioning efforts at Lowe Worldwide -- which Interpublic yesterday said won the pan-European work for GM's two minivan brands -- and said they expect the struggling agency to turn profitable by no later than 2008.
Mr. Roth indicated the company last week completed final presentations in the $760 million holding-company pitch against WPP Group for Dell's advertising account, and expects to hear from the computer marketer within a month.