By Nathalie Tadena
Advertising firm Interpublic Group of Cos. reported
better-than-expected first-quarter revenue growth and margin
expansion on Friday, despite continued foreign-exchange
headwinds.
The company said organic revenue--which strips out
foreign-currency fluctuations and acquisitions--increased 5.7% in
the latest quarter, surpassing the 4.2% growth that analysts
estimated on average. Interpublic also reported a narrower
quarterly loss that exceeded analysts' expectations.
Shares of the company, which owns agencies such as McCann and
FCB, rose 3.1%, to $21.82, in U.S. trading.
"Organic revenue performance was not only competitive, it looks
to have come in at the top end of our sector," Interpublic Chief
Executive Michael Roth said Friday on an earnings call with
analysts. "It bears noting that digital services across the group
were significant contributors to organic revenue growth."
Earlier this week, fellow ad holding companies WPP PLC reported
organic revenue growth of 5.2%, while Publicis Groupe SA posted
0.9% organic revenue growth and Omnicom Group Inc. came in at
5.1%.
Interpublic's margins remain below those of its industry peers,
even though they have been improving. In the company's most recent
quarter, its operating margin improved to 0.5% from negative 0.7%.
The company posted its first operating profit in more than a
decade.
Though the first quarter is Interpublic's smallest of the year
in terms of revenue, the company said it is well-positioned to meet
its margin improvement targets and organic growth goal of 3% to 4%
for the year.
"As we look to the balance of the year, we see some geographic
markets that will require monitoring and we will of course remain
vigilant on costs and on the appropriate levels of margin
conversion going forward," Mr. Roth said.
Interpublic reached a settlement earlier this year with activist
investor Elliott Management, which took a stake in the company last
year and had been pushing for a sale and operational improvements.
The settlement included three new directors joining Interpublic's
board and the creation of a new finance committee to review matters
such as margin improvement.
Overall, Interpublic reported a quarterly loss of $1.8 million,
compared with a loss of $20.9 million a year ago. On a per-share
basis, the company broke even. Revenue increased 2.4%, to $1.68
billion.
Analysts had projected a per-share loss of 3 cents on $1.65
billion in revenue, according to Thomson Reuters.
Currency fluctuations reduced the quarter's top-line sales by
4.4%. Interpublic expects a foreign-exchange headwind of 5.1% for
the year, based on recent exchange rates.
Interpublic on Friday also disclosed that earlier this month a
federal judge in Brazil authorized the search of a local
subsidiary's records, and the former general manager of that agency
was detained by police. Interpublic said it is continuing its
investigation into certain transactions in Brazil and has taken "a
number of remedial and disciplinary actions" based on its findings.
The company said it is cooperating with authorities.
Lisa Beilfuss contributed to this article.
Write to Nathalie Tadena at nathalie.tadena@wsj.com
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