IPG Swings to a Profit in 2007

NEW YORK Interpublic Group today reported net income of slightly more than $131 million for 2007, a significant upward swing from 2006’s net loss of $79.3 million.

Year-to-year, revenue grew nearly 6 percent to $6.6 billion, IPG said.

The No. 3 holding company also achieved a profit in the fourth quarter, when net income more than tripled to about $163 million, up from $49 million in the same period of 2006. Revenue for the quarter grew 5.6 percent to almost $2 billion.

Organic revenue growth cooled a bit from the third quarter, when IPG reported a 5.7 percent gain. In Q4, organic growth (which excludes acquisitions and currency fluctuations) declined to nearly 2 percent and, for 2007, organic revenue was up 3.8 percent overall.

IPG attributed its organic growth to new business from existing clients, new clients in advertising and public relations and the completion of several projects within the events marketing realm.

“While organic revenue performance in the fourth quarter moderated relative to very strong results in Q2 and Q3, we see no evidence of a pullback in 2008,” said IPG CEO Michael Roth, in a statement. “Overall, it’s gratifying to see dramatic improvement in so many aspects of our business. When you factor in our success in developing and attracting talent, the strategic actions we have been taking and the strong 2007 financial performance, it’s clear that we are well-positioned to achieve competitive organic growth and [an] 8.5-9 percent margin in 2008.”

IPG also said it had achieved compliance with Sarbarnes-Oxley accounting standards, several years after the law promulgating the standards had gone into effect.

During an hour-long conference call with industry analysts after the results came out, Roth and IPG chief financial officer Frank Mergenthaler said that while the company’s turnaround has shown positive signs, its progress will continue to be non-linear, particularly from quarter to quarter.

“It’s much more illustrative to look at where we have come from, what has been accomplished over the past two years and the trajectory of our business,” Mergenthaler said.

IPG ended the year with an operating margin of 5.3 percent, up markedly from 1.7 percent at the end of 2006. Despite the progress, however, Roth declined to increase his current margin goal for 2008: 8.5 percent to 9 percent.

As recently as mid-September, Roth had publically vowed to achiev double-digit margins by the end of next year but, in November, amid analyst skepticism, he lowered his projection.

“We’re striving to do the best we can,” Roth said today. “The reason we put the 8.5/9 percent out there is because that we saw as a more realistic target, given what was going on in the environment.”