Interpublic Loss Widens in the First Quarter, But Revenue Up

CEO Michael Roth Upbeat on McCann's Prospects for Turnaround

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Interpublic Group of Cos. on Friday reported that its first-quarter net loss widened to $59.2 million, compared to $45.9 million one year ago.

The loss is in part attributable to operating expenses at the company -- which is the parent of global networks McCann and DraftFCB, and domestic shops such as Deutsch, Mullen and the Martin Agency.

Revenue was up, however. Organic revenue increased 2.3% from the year-prior period. Nomura Securities called that "nicely ahead of expectations." Total revenue grew 2.4% to $1.54 billion, thanks to growth in international regions. Latin America, which was up 8.8% the company said, and the U.K. was up 10.5%. Total international revenue rose 3.4% while U.S. revenue increased 1.7%. The U.S. reported 0.5% organic growth.

With the Eurozone under pressure, organic revenue in continental Europe decreased 5.8%. On an earnings call, IPG executives also referenced notable revenue decrease in a number of the smaller national economies across the region. In addition, France decreased more than the recent trend, while Germany was flat. And while Asia-Pac, the group's largest market outside the U.S., saw organic revenue growth of 4.3%, that's down from standard double-digit growth in the region.

On the earnings call, Mr. Roth referred to a number of client new business wins and retentions -- Chevrolet, Acura, Sabic and the U.S. Postal Service -- as an encouraging development for the quarter. He also seemed upbeat about McCann, which seems to be making some progress after several years of account losses and management upheaval.

"At McCann, we have begun to see demonstrable progress from the newly configured leadership team," Mr. Roth said during the call. "The consolidation of Chevrolet business at Commonwealth with McCann is a testament to the agency's creative and strategic capabilities. The IPG Sabic win was led by a Weber, Jack Morton and McCann collaboration. And the recent win of the US Postal Service is another sign that the agency is gaining traction."

Just last month, GM consolidated its Chevrolet creative business with McCann, ending the divided Commonwealth structure put in place by former GM chief marketer Joel Ewanick. The structure had split the global work between McCann and Omnicom's Goodby, Silverstein & Partners. The addition of U.S. and global Chevy work previously handled by the Omnicom shop signaled positive momentum under McCann Worldgroup's new CEO Harris Diamond. The longtime IPG executive replaced Nick Brien in November.

Mr. Roth also highlighted the success of Hill Holliday, Deutsch and The Martin Agency and explained that these agencies all "combining more regularly with Lowe to collaborate on new business requiring global or pan-regional solutions."

Revenue of $1.24 billion was flat for the Integrated Agency Networks group, which consists of McCann Worldgroup, DraftFCB, Lowe & Partners and IPG Mediabrands.

The PR-heavy Constituency Management Group, on the other hand, reported an increase of 14.8% to $301.9 million in revenue. The groups includes PR agencies Weber Shandwick and GolinHarris, as well as brand experience agency Jack Morton Worldwide, Octagon and Futurebrand.

Mr. Roth said that he believes Interpublic can its financial targets for 2013, which include between 2% and 3% organic revenue growth and 50 basis points of improvement in operating margin.

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