One to Watch: Interpublic's rebirth

Published on Tuesday 3 November 2009 19:24

Interpublic $5.90 +$0.01 Scotsman says BUY

THE "Mad Men" of the US advertising industry have faced a series of daunting challenges. Not only have clients slashed advertising expenditure, but they also have the problem of getting the marketing message over in an increasingly fragmented media landscape.

But while this fragmentation poses problems for many, it plays into the hands of Interpublic. The company has made a series of acquisitions, providing it with the skills to execute ever more complex advertising campaigns.

A new management team has succeeded in reviving an abused but high-quality franchise. Three years ago, Interpublic was in breach of the Sarbanes-Oxley Act, a US federal law designed to combat corporate and accounting scandals. Now, Interpublic has undergone a transformation, and last year's results were the best in more than a decade. Outside the US, the company benefits from strong markets in India and Brazil. New accounts include the London Olympics and Johnson & Johnson's drugs arm.

Interpublic owns McCann Worldgroup, the advertising industry's largest provider of integrated campaigns. One of its key customers, General Motors, has emerged from Chapter 11 bankruptcy reorganisation and has made noises about increasing its advertising budget for 2010.

We think Interpublic has the flexibility and specialist skills necessary to adapt its advertising to a variety of media, making it likely to prosper in the months ahead.

&#149 Simon Moss is investment director of global developed market equities at Scottish Widows Investment Partnership (Swip). Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.

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