Omnicom Revenue Down, Profit Up In Q3

For the second straight quarter, Omnicom reported a drop in revenue -- this time, a decline of 1.9% to $3.79 billion. In the second quarter, the revenue decline was 2.4%. Third-quarter net income, however, was up 3.9% to $263.6 million.

Organic growth in Q3 was 2.8%, down from the 3.5% growth reported in the second quarter. Through the first nine months, organic revenue growth was 3.5%, compared to the 3.9% reported for the first half of the year.

The company attributed the third-quarter revenue decline to a decrease in M&A activity. It also pointed  to the sale of some underperforming assets the company indicated it was looking to sell, as well as assets that were not a long-term strategic fit, such as its print business Novus.

Revenue through the first nine months remains in negative territory -- down 0.7% to around $11.1 billion, partly due to the impact of foreign exchange rates.

Organic growth in North America picked up slightly to reach 2.1% in the third quarter, compared to the very weak 0.2% growth posted in the second quarter. The UK posted 3.8% growth, and Europe turned in a solid 7.8% organic growth return. But APAC was tepid at 1.4%, Latin America fell 5.4% and the Middle East and Africa region was down 1.6%.

Omnicom CEO John Wren told analysts on a call Tuesday morning that he expected continued improvement in the U.S., given some organizational and management changes that the company is making.

Those changes include the reorganization of its CRM and digital agencies under a new operating unit called Precision Marketing Group that is headed by Luke Taylor the former DigitasLBi CEO.

Branding and PR operations have also been a drag on U.S. operations, and Wren noted recent changes in top management at Interbrand where Charles Trevail was recently named CEO.

The holding company’s PR division has also turned in inconsistent results, and Wren noted that management changes in that sector will be implemented shortly.

“I’m looking for pretty immediate improvement,” said Wren, commenting on some of the changes. The firm is now “well positioned to meet the goals we set for the year,” despite what he called an “uncertain environment.”

The company is estimated to have made about $500 million in divestitures this year. Wren said the planned asset sales were “substantially done,” with the exception of a couple of small businesses.

Wren also told analysts there are signs some of the big CPG companies have cut back on spending, intent on ramping those budgets back up to maintain market share. “Until they do, we can’t claim victory,” he cautioned.

Commenting on results in an investor note, Pivotal Research senior analyst Brian Wieser wrote: “Omnicom reported decent organic growth and EPS results for 3Q17. As per usual, assessing Omnicom’s quarterly results versus competitors are made challenging because of pass-through activities recorded as revenues. But it appears that most of the company’s underlying trends are favorable." 

The company’s shares were up more than 2% on news of the results in midday trading on the New York Stock Exchange.




Next story loading loading..