IPG’s Q2 Expenses Fall, Income Rises

NEW YORK Interpublic Group today reported net income of nearly $47 million for the second quarter, up from $3.5 million in the same period a year ago.

IPG attributed the gain to declining expenses, particularly professional fees, which totaled $48.6 million, down from $68 million in the same quarter last year. The No. 3 holding company also lowered costs by selling non-core business units.

The income boost was achieved despite a 5 percent revenue decline to $1.53 billion, from $1.6 billion a year ago, IPG said.

Revenue also fell 3 percent for the first half of 2006 to $2.85 billion, from $2.93 billion in the first half of 2005. IPG recorded a $125 million net loss for the first half, an improvement on its loss of $147 million in the same period last year.

Among those goals is achieving “competitive organic growth” by 2008. For the first half of 2006, IPG’s organic revenue grew slightly (up 0.5 percent), but for the second quarter it fell 3 percent, due in part to the timing of recognizing revenue.

“We have previously indicated to you that, in light of the fact we are cycling through some significant losses, this would be a difficult year for us on the top line,” said IPG CEO Michael Roth, during a morning conference call with industry analysts. “We are therefore pleased that during the first half of this year, Interpublic experienced organic revenue growth, albeit modest.”

He added, “All of our companies are increasingly capable of winning in the marketplace and we are seeing particularly good momentum in marketing services. So, while the bar on organic will still be high for the rest of this year, we are on track to bring 2006 in around flat on this key metric, which positions us well as we head into next year.”

A major focus for the balance of this year will be managing costs and delivering margin improvement. “Our CMG and McCann units are performing well, and we are confident that the new directions we are taking with Draft FCB Group and Lowe will yield positive results,” Roth said.

For the first quarter, IPG reported a $182 million net loss on “essentially flat” revenue of $1.3 billion [Adweek Online, May 10]. Among the factors IPG cited at the time were the rising costs of professional fees and salaries.

Professional fees, for example, totaled $91 million for Q1, compared to $75 million in the first three months of 2005.