The overall tone of business remains solid: Michael Roth

Michael Roth, Chairman & CEO, IPG announced the Group's results for second quarter and first half of 2014. Roth commented on the success of the Group’s strong performance in revenues, profit and earnings as well as the strength of the Group’s innovations in media offerings and its substantial positioning in terms of future organic growth.

Second quarter diluted earnings per share was $0.23, a 28% increase from $0.18 per diluted share a year ago; excluding the charge for early extinguishment of debt, diluted earnings per share was $0.25. Second quarter reported revenue increase of 5.4% and organic revenue increase of 4.7% . Second quarter operating income grew 12% to $195.8 million, an operating margin of 10.6%. Second quarter results include a non-operating pre-tax charge of $10.4 million related  to the early extinguishment of the Company's 6.25% Notes due 2014.

“We are pleased to report a quarter of strong revenue, profit and earnings growth. Our operating results underscore the competitiveness of our agencies, and the quality of our offerings in key growth markets and disciplines,” said Michael I. Roth, Interpublic’s Chairman and CEO. “We are winning share in digital and marketing services, successfully innovating with our media offerings, and our global ad networks continue to trend positively. Our financial strength remains a source of significant value creation, and we will remain focused on cost discipline and executing on our 2014 plan. For the full year, we are well-positioned to exceed our organic growth target of 3-4% and improve operating margin by at least 100 basis points, to 10.3% or better. By doing so, we can build on recent performance and further enhance shareholder value.”

He said, “In the US, organic growth was 2.9% in Q2, or 3.5% excluding pass-through revenues, led by our digital specialists, Mediabrands, McCann, and CMG. International continued to be strong with 7.1% organic growth in Q2. Increases were solid in all major regions, with the exception of Continental Europe. Organic growth was 16.4% in the UK, 7.4% in LatAm, 4.4% in AsiaPac and 18.0% in our group of Other Markets. Continental Europe decreased 1.4% organically. International growth was notably strong in digital, media and marketing services.”

“McCann once again posted good results. The agency prevailed in the highly competitive Cigna pitch, and added business from a leading multinational client in Reckitt Benckiser, as well as winning major local assignments in Europe and Asia. FCB’s performance in Brazil and India, where the agency is among the market leaders, remains strong,” he further added.

Below is the summary of the results:

Revenue

• Second quarter 2014 revenue was $1.85 billion, compared to $1.76 billion in the second quarter of 2013, with an organic revenue increase of 4.7% compared to the prior-year period. This was comprised of an organic revenue increase of 7.1% internationally and 2.9% in the U.S.

• First half 2014 revenue was $3.49 billion, compared to $3.30 billion in the first half of 2013, with an organic revenue increase of 5.6% compared to the prior-year period. This was comprised of an organic revenue increase of 8.0% internationally and 3.8% in the U.S.

Operating Results

• Operating income in the second quarter of 2014 was $195.8 million, compared to operating income of $174.8 million in 2013. Operating margin was 10.6% for the second quarter of 2014, compared to 10.0% in 2013.

• For the first half of 2014, operating income was $184.1 million, compared to operating income of $132.4 million in 2013. Operating margin was 5.3% for the first half of 2014, compared to 4.0% for the first half of 2013. 

Net Results

• Second quarter 2014 net income available to IPG common stockholders was $99.4 million, resulting in earnings of $0.24 per basic and $0.23 per diluted share.  Excluding the impact of the early extinguishment of the Company's 6.25% Senior
Unsecured Notes due 2014 (the "6.25% Notes"), diluted earnings per share was $0.25. This compares to net income available to IPG common stockholders a year ago of $79.9 million, or $0.19 per basic and $0.18 per diluted share.

• First half 2014 net income available to IPG common stockholders was $78.5 million, resulting in earnings of $0.19 per basic and $0.18 per diluted share. Excluding the impact of the early extinguishment of the 6.25% Notes, diluted earnings per share was $0.20. This compares to net income available to IPG common stockholders a year ago of $20.7 million, or $0.05 per basic and diluted share.

Operating Results

Revenue

Revenue of $1.85 billion in the second quarter of 2014 increased 5.4% compared with the same period in 2013. During the quarter, the effect of foreign currency translation was negative 0.5%, the impact of net acquisitions was positive 1.2%, and the resulting organic revenue increase was 4.7%.

Revenue of $3.49 billion in the first half of 2014 increased 5.7% compared with the first half in 2013. During the first half of 2014, the effect of foreign currency translation was negative 0.9%, the impact of net acquisitions was positive 1.0%, and the resulting organic revenue increase was 5.6%.

Roth also pointed out that McCann once again posted good results, performance at Mediabrands remained strong in the quarter, FCB continues to make progress in its transformation and at Lowe, emerging markets remain an area of strength, as does the high standard of the agency’s creative product and digital specialist agencies all posted very strong performance in the quarter.

He remarked, “We expect solid growth in the second half, though somewhat tempered relative to the first six months.  We believe that we are well-positioned to exceed our organic growth target of 3-4% for the year and improve operating margin by at least 100 basis points, to 10.3% or better. To do so, we must stay closely focused on execution – and we’ve been consistently clear that for us 2014 is all about execution. This means driving further competitive growth and staying focused on costs, so as to significantly improve margins, which will allow us to continue to build on recent performance and further enhance shareholder value.”
 

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