Omnicom's Wren Calls Earnings 'Solid'

by Steve McClellan, Oct 16, 2012, 11:36 AM

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Omnicom Group was first out of the gate among agency holding companies disclosing third-quarter earnings, reporting a 1% revenue gain to $3.4 billion versus the same period a year ago. Net income was flat at nearly $204 million. For the first nine months of the year, the agency holding company’s revenue was up 2.5% to nearly $10.3 billion -- with net income of $691.2 million, up 1.5%.

Omnicom’s organic revenue growth -- considered a key performance indicator for the ad industry, and which excludes the impact of currency fluctuations, acquisitions and dispositions -- was 3.5% for the third quarter. For the first nine months it was 4.5%.

On a conference call with analysts and investors earlier today, Omnicom CFO Randall Weisenburger said he remains confident that the company will deliver 4% organic revenue growth for full-year 2012. By comparison, the company had 6.1% organic growth in 2011.

Company CEO John Wren described the company's third-quarter performance as "solid" particularly amid all the macroeconomic uncertainty. He described the current economic environment as “fragile” and stated that industry growth globally could be impacted going forward. He said the company would remain “vigilant in managing expenses.”

Europe remains the most problematic geographic territory -- particularly Southern Europe, where deep spending cuts by clients continue. The U.S., said Wren, remained relatively stable in the third quarter with 3.1% organic growth.

Latin America, led by Brazil and Chile, continued to grow at a double-digit pace for the holding company during the quarter. China, Japan, India and Singapore were the leaders in Asia.

By category, the auto, consumer goods, retail and technology sectors remained strong. The pharmaceutical business remained weak, and is not expected to rebound until next year. The telecom sector also remained weak.

Wren made a point of noting that he believed digital agencies up for sale were overpriced. Earlier this year, the company was reportedly in the running to acquire Amsterdam-based digital agency LBi. Publicis Groupe, however, ended up striking a deal to acquire the shop.

Omnicom did make several third-quarter acquisitions, however, including Shanghai-based Nim Digital and London-based medical communications company Chameleon Communications International.

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