IPG Reports -- and Touts -- 0.5% Increase in Organic Revenue

Company Starting to Rebound From Client Losses, Accounting Problems

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NEW YORK (AdAge.com) -- Interpublic Group of Cos. today sounded its most optimistic note in recent memory as it reported a modest increase in organic revenue and a downtick in professional-services fees over the first half of the year.
Interpublic Chairman-CEO Michael Roth
Interpublic Chairman-CEO Michael Roth

The results showed that Interpublic, the third-largest ad holding company, is starting to make some headway against its two largest challenges of past years: major client losses and the tremendous cost of sorting out the accounting problems that have led to a restatement of financial reports.

"Interpublic is no longer looking in the rearview mirror at past financial statements," said Chief Financial Officer Frank Mergenthaler.

Overall revenue decreased
Mr. Mergenthaler and Chairman-CEO Michael Roth pointed to organic-revenue growth of 0.5%, although overall revenue decreased 2.7% during the first half. During that time, operating expenses declined $2.94 billion from $2.99 billion in the first half of 2005, reflecting a lightening of the professional-fees load. Revenue declined during the second quarter because of the timing of some revenue recognition, an issue Interpublic identified in its first-quarter results. In the second quarter, net income was $68.9 million, up from $9 million last year.

In response to an analyst, Mr. Roth said the first six months have seen a net positive for Interpublic's new-business performance. Mr. Mergenthaler said Interpublic should be compliant with Sarbanes-Oxley requirements by the time it files its 2007 annual report.

Recent past earning calls with analysts have seen Mr. Roth less upbeat, often expressing disappointment in the company's performance, especially in the important metric of organic revenue, and vowing improvement. While still measured about the turnaround process, expected to last until 2008, Mr. Roth today said: "The tone of our business is good."

Units 'performing well'
"Our CMG [public relations, event marketing and branding units] and McCann units are performing well, and we are confident the new directions we are taking with Draft FCB and Lowe will yield positive results," Mr. Roth said. He was referring to the recent merger of direct marketer Draft and ad-agency network Foote Cone & Belding and the ongoing turnaround at its troubled Lowe network.

Mr. Roth said the Draft FCB Group will reveal its leadership lineup and go-to-market strategy in September. He said he is pleased with the integration efforts that have taken place since the merger was announced in earlier this year, namely the agency's wins of work for Atari and Merrill-Lynch.
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