Omnicom Revs Up 5%, 'Optimistic' About 2012

by Steve McClellan, Apr 17, 2012, 11:40 AM

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Omnicom Group reported a 5% gain in revenue for the first quarter of 2012 to $3.3 billion, with a 1.3% rise in net income to $204.6 million. Organic revenue growth, which excludes acquisitions and currency fluctuations, climbed 5.1%. Drivers included strong new business results, a rebound in spending by some clients and above-average growth in Asia and Latin America, company executives said.

On a conference call with analysts, Omnicom CEO John Wren said that revenue for the quarter exceeded internal forecasts, and he characterized the company’s year as off to “a very good start.” The company’s pre-tax and interest profit margin improved by more than a full percentage point to 11.7%.

Wren stated definitively that the company would achieve its goal this year of reaching a margin of 13.4%, or back up to 2007 levels before the financial crisis kicked off in 2008.

While the company does not formally offer full-year revenue guidance, company CFO Randall Weisenburger told analysts that a gain of between 3% and 5% “sounds like a reasonable range for growth for the year.”

Wren, however, made a point of downplaying expectations for the second quarter, when in 2011, the company’s revenues rose 8.4%. That was an anomaly that occurred for a number of reasons that Wren did not detail. “I don’t expect that again,” he said.

But several times during the call, Wren said the company was “cautiously optimistic” about full-year results, given uncertainties that continue to plague Europe, and to a lesser extent, Asia. Currently, the outlook for Asia looks "OK," said Wren, while noting that in recent weeks, some concerns have been reported about slowing growth in the region.

Business development was strong in the first quarter -- Omnicom won $1.1 billion in net new business. A major victory was the global Chevrolet creative assignment that Omnicom teamed with Interpublic Group to pitch.

The company also reported improvement in its PR business segment, which posted 4.4% organic growth, the best performance for the unit in several quarters.

One business segment that struggled was pharmaceutical, which was down 3%. Wren attributed the drop to drugs whose marketing plans were put on hold after failing to get governmental approval for public sale, as well as some lost client business. “It’s going to be a tough year in the pharma business,” he said.

Wren also said the company would likely accelerate the pace of acquisitions this year, particularly in Asia, where it just reached an agreement to acquire Nim Digital, the Shanghai-based shop. Last month, it bought Japan’s Medical Collective Intelligence, a specialist agency serving the pharmaceutical industry.

While the acquisition pipeline is robust, the exact timing of deals is harder to predict, said Weisenburger, noting that the Nim transaction took over a year to complete.

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