The failure of McCann-Erickson’s European operations “to reconcile intra-company accounts on a timely basis” has compelled parent Interpublic Group to restate its accounts over the past five years.
Discovery of the massive booboo, which relates to a single multinational client, revealed $68.5 million (€69.43m; £44.50m) in improperly allocated charges, requiring the Interpublic to take a pre-tax charge for that sum.
Profits from 1997 through 2000 have now been adjusted downward by amounts varying between $4 million to $6.8 million annually, while for the 2001 fiscal, the net loss has been upped by $5.9 million to $113.1m.
In Q2 this year, however, Interpublic survived a slide in revenues (down 8.4% to $1.61 billion) to achieve earnings of $117m – or 31 cents a share – compared with a $113.1m loss (minus 31 cents) in the same quarter last year.
The group, the world’s second largest agency holding company, also identified “unfolding” problems within the motor-racing division of its sports marketing subsidiary Octagon, whose performance necessitated a pretax investment impairment of $16.2 million. Without this hit, group earnings would risen to about 34 cents a share.
Data sourced from: The Wall Street Journal Online; additional content by WARC staff