Omnicom Stock Takes A Hit As Q2 Revenue Dips

Omnicom Group revenue fell 3.6% in the second quarter to $3.7 billion, the company reported Tuesday, citing the negative impact of exchange rates and sale of certain assets over the past year. Net income was up 1.8% to nearly $371 million.

The company’s stock price fell more than 3% in early morning trading on the news.

Organic revenue growth, which factors out currency fluctuations and M&A activity, was up 2.8%. Organic growth was 3.2% in the U.S., an improvement over the 2% recorded in the first quarter.

Omnicom CEO John Wren told analysts he was “pleased” with results for the quarter and the company was on track to meet full-year goals, including organic growth of 2% to 3%.

Asked about the recent multibillion big data investments by Publicis (which bought Epsilon) and Interpublic (which bought Acxiom Marketing Solutions), Wren said Omnicom considered its own bids for both. But it ultimately decided neither made sense for a number of reasons -- including the potential return on investment, integrating those businesses into the holding company and general risks about the usefulness to clients of the products offered by what he termed “legacy businesses.”



How such data is regulated in the future is also a concern, he said. “God bless them, but it will be a challenge,” Wren said of both deals.

By contrast, Omnicom has opted to build its own data and analytics tech stack in-house using Annalect and precision marketing platform Omni as the foundation.

The company has invested millions in developing the offering — which it sees as more flexible and adaptable to changing client needs, said Wren. The company has also invested millions to develop the stack and further investment is planned, although nowhere near the $6 billion it cost to buy Epsilon and Acxiom, said Wren.

Wren said the firm remains cautiously optimistic about market conditions, noting the U.S. economy continues to perform well, but at some point “we can expect some dips.” The problem, he adds, is the difficulty in predicting when those dips will occur.

Wren also tipped his hat to WPP CEO Mark Read for going public about conflict concerns when Accenture and other consultants that compete with holding companies conduct media audits and agency reviews.

WPP recently indicated through press reports (although it declined official comment) that it would not participate in audits and reviews led by Accenture.

“I applaud Mark Read for making it a more public issue,” said Wren. But he emphasized “this is not a new problem.” It is one the company had dealt with “client to client for a long time.” Usually, he added, “we mutually agree on who will do an audit or not do an audit of our results,” implying a competitor would not get the assignment.

Across markets beyond the U.S., Q2 organic growth was 11.8% for the rest of North America, 5.7% in the U.K., 1.5% for Europe, and 1.9% for Asia Pacific. Latin America decreased 2.4%, in large part due to struggles in Brazil, and the Middle East and Africa decreased 8.3%.

First-half revenue was down 4% to $7.2 billion and net profits rose 0.9% to 0.9% to $634 million. Organic growth was up 2.7%.

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