Omnicom Boost: 3Q Revs Rise

by Wayne Friedman, Oct 21, 2008, 4:41 PM

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Bucking some negative advertising news, marketing-services holding company Omnicom Group modestly improved its third-quarter net income. But the company is cautious about the near term.

The New York-based company witnessed a 6% gain in net revenue to $213.6 million. Worldwide revenues also climbed 6.9% to $3.32 billion. Omnicom's best news came from its international business, where revenue climbed 10.5% to $1.6 billion--up from $1.4 billion. U.S. revenue climbed more modestly--up 3.8% to $1.7 billion during the period.

Although economic times are hard, Omnicom CEO John Wren says only its automotive and retail clients are cutting back somewhat. "We expect the fourth quarter to be a challenge, as many normal year-end marketing projects may not be authorized if financial marketing continues to be volatile," said Wren.

Regarding a possible long-term recession, Wren says: "It will create opportunity for us to acquire talent in the industry who may have not moved from where they are working... We'll make lemonade out of the lemons that are served."

Omnicom says its strongest sectors came from consumer products and services clients--up 20% in business for the quarter. Telecommunication company business improved 15%.

"Everybody else remains cautious, but they haven't indicated they are cutting back yet," says Wren. He notes that more experienced clients, which are not subject to the wild swings in credit market concerns, might see great opportunities to start marketing projects once the financial markets settle down. Wren says there is "way too much noise out there" to make clear projections.

In regard to new business, Wren says there is limited activity this period. He notes that the fourth quarter is typically a slower period when it comes to client reviews.

Omnicom's positive results continue its upturn from earlier this year, when net income for the nine months increased 10.2% to $729.3 million. Worldwide revenue for the nine months has had double-digit percentage gains: 10.1% to $9.9 billion.

Omnicom says about 85% to 90% of fourth-quarter revenue will be spent, but is unsure about the other 10%--which comes mostly from "project revenue" efforts. Randy Weisenberger, executive vice president and CFO of Omnicom, says there is a "couple of hundred million dollars in project revenue" in the fourth quarter which isn't always "visible. Budgets are getting developed later," he notes.

Omnicom Group's stock was down 7.5%, or $2.50 in midday trading to $30.90.

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