Omnicom Reports Strong Start To 2004

Omnicom kicked off the new year among the advertising holding companies with upbeat news, double-digit increases in revenues, and profit for the first quarter.

Revenues rose 15.2 percent to $2.23 billion for the company, which owns media buying shops OMD and PhD. Net earnings were $135.6 million/72 cents a share, compared to $115.5 million/62 cents a share in the first quarter of 2003. Advertising holding companies usually are lagging indicators of a recovery, but with a more positive outlook emanating from just about every media sector, Omnicom's results are one more piece of evidence that the advertising industry is returning to health after three lean years.

All sectors of the business--including advertising, specialty advertising, public relations, and CRM--performed well for the first time in three years, said John Wren, Omnicom's president and chief executive officer.

"The year is off to a strong start," Wren said Tuesday morning. Traditional media accounted for 44 percent of Omnicom's business, with 56 percent coming from the marketing services. Marketing services included 34 percent CRM, 11 percent public relations, and 12 percent specialty communications, including health care.



Traditional media was up 13 percent in the quarter compared to the first quarter of 2003; marketing was up 16 percent. CRM continues to be strong--up 10 percent--and specialty communications increased 17 percent. Public relations, which has been hit hard in the recession at Omnicom as well as other holding companies, rose 7.8 percent. PR began to recover in the second half of 2003, Wren said.

There was $1.22 billion in net new business in the quarter, including DirecTV, the California Lottery, and the Jimmy Dean Sausage account at Sara Lee. Omnicom lost AT&T Wireless and Ralph Lauren.

Omnicom executives said that that the pricing pressures that had been big issues in recent years may have calmed down, although Wren said that Omnicom only works with accounts for which there's a "proper" profit margin. He said that the advertising industry will still be under some type of pricing pressure.

"I don't think the pendulum has swung in either favor," he said. "I think it's a more normal system now."

Omnicom confirmed that it was in talks to acquire unspecified businesses, but didn't make any announcements. It has already announced one acquisition in the first quarter. Wren said that one area that Omnicom might focus on is Asia.

"We make acquisitions when they're good fits with Omnicom--they're accretive to our shareholders, and there's a fit with our management team," Wren said. "We don't really budget specific dollar amounts for acquisitions. We don't think that's a prudent way to go about it."

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