Holding companies report mixed results for 1st quarter

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Europe's woes hurt agency results in the first quarter, but some report signs of improvement ahead in selected markets.

Publicis Groupe, Interpublic Group of Cos. and Grey Global Group all saw their results pulled in different directions by the weak European markets and the U.S. dollar's weakness against the euro.

The weak dollar helped cushion continuing losses at Interpublic, which posted a net loss of $16.9 million, nearly double the $8.6 million loss in the year-ago period. Revenue was up 6% to $1.4 billion, but down 0.6% on an organic basis. The weak dollar took European revenue from a 7.1% growth rate to a 5.6% drop on an organic basis, while U.S. revenue was up 3.9%, or organic growth of 1.3%.

"We appear to have closed the gap with our primary competitors," said Chairman-CEO David Bell. Chief Financial Officer Chris Coughlin noted the organic-growth figure has improved in each of the last four quarters and both executives said they expect it will turn positive this year.

Interpublic is the last of the major holding companies with no organic growth; last month Havas posted its first up quarter in two years (AA, May 3). Analysts have begun to rely on that figure when trying to gauge Interpublic's potential revenue growth, since the company announced it won't disclose net new-business figures because management considers the numbers unreliable.

Among key European markets, the first quarter has been a stable period in France and Germany, which should show some pickup by June and growth in the second half, said Publicis Chairman-CEO Maurice Levy. He added that the southern European markets are recovering well, but northern European economies are still struggling.

strong euro

Publicis posted $1.05 billion in revenue for the first quarter, down 4.3% from last year, but an increase of 4.4% on an organic basis, after factoring out acquisitions and currency fluctuations. Unlike U.S. companies, European corporations don't report quarterly income.

Nearly all the negative impact came from the dollar's weakness against the euro, Mr. Levy said. Revenue was flat in nearly all regions, except North America-44% of Publicis' revenue-where it was down 10.8%, but would have been up 4.2% without exchange shifts.

Separately, Grey Global Group posted a 23.5% increase in net income, to $6.3 million, on revenue of $343.9 million, up 15.5%. Grey's management said growth came in large part from improvements in its international operations, although results were affected by the weak dollar.

Up, down

First-quarter profit

Grey Global Group (GREY)

First Quarter

Revenue: $343.9 million, up 15.5%

Net income: $6.3 million, up 23.5%

Interpublic Group of Cos. (IPG)

First Quarter

Revenue: $1.4 billion

Net loss: $16.9 million

Publicis Groupe (PUB)

First Quarter

Revenue: $1.05 billion, down 4.3%

Net income: N/A*

*European companies don't report quarterly income.

Source: Company reports. Changes are vs. last year's first quarter.

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