Interpublic executives sounded an optimistic note in releasing first-quarter results today, noting recent new business wins at its largest operating unit McCann Worldgroup and saying the company is on the way to meeting full-year revenue growth targets of 2-3 percent.
“It’s a solid beginning to 2013,” chief executive Michael Roth told financial analysts. “At this point this year versus last year, we’re in a much better position.”
But there was little doubt that head winds from 2012 account losses at two of its largest agency networks, McCann Erickson and Draftfcb, continued to cycle through results. Organic revenue rose more than 2 percent compared to a 3 percent increase in the year-earlier period.
While overall revenue in the quarter rose 2 percent to $1.54 billion, losses broadened to $42.4 million, compared with a loss of $39.4 million in the 2012 quarter. (In addition to account losses, historically, Q1 is challenging for Interpublic as it is the smallest revenue generator of the year, while overhead costs remain consistent with other quarters.)
A more detailed look at the quarter’s results put the impact of those 2012 U.S. account losses into clearer perspective. International organic growth, led by Latin America, the U.K. and Middle East, rose about 5 percent while there was no growth in the U.S. Integrated agency networks like McCann, Draftfcb and Lowe registered no organic growth while the company’s PR and marketing services operations realized a 14 percent increase. Interpublic CFO Frank Mergenthaler said the company expects the effect of those 2012 agency account losses to end midyear.
Roth addressed the recent top management changes at his agencies, particularly at McCann Worldgroup, where CMG chief Harris Diamond replaced Nick Brien in November. Citing wins like the consolidation of Chevrolet business at McCann and the addition of the U.S. Postal Service business, he said there is “demonstrable progress” underway. (While the USPS win came out of the hide of other IPG agencies, Roth used it as an example of growing momentum at McCann.) In discussing McCann, the Interpublic chief said “morale is much higher” and “talent is stronger” at the agency.
Roth also voiced confidence in the recent selection of Young & Rubicam exec Carter Murray to lead Draftfcb, while acknowledging the contractual delay in Murray actually assuming it. At Lowe, Roth noted “good, solid results” in Q1, though he is looking for greater margin improvement there.