Omnicom Group's Third Quarter Profit Up 16.7%

Organic Revenue Growth Strong on a Worldwide Basis, Holding Co. Chief John Wren Says

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Despite unpredictability in the economy, Omnicom Group posted double-digit profit and international revenue growth in the third quarter of 2011.

The U.S.-based holding company, which is the parent of agency networks BBDO Worldwide, TBWA Worldwide and DDB Worldwide, reported profit in the quarter increased 16.7% to $203.7 million, compared with $174.6 million in the same period last year. Omnicom's profit for the first nine months of the year grew 17.1% to $680.7 million, which is almost $100 million more than it counted a year ago.

Worldwide revenue in the quarter grew 12.9% to $3.38 billion from $2.99 billion in the third quarter last year. But much of that growth appears to be being fueled by emerging markets rather than the U.S., which remains the largest ad market in the world. Omnicom's domestic revenue for the third quarter grew 5.3% to $1.7 billion, whereas international revenue increased 21.8% to $1.68 billion.

According to Omnicom Group's CEO, John Wren, who spoke to analysts on a conference call this morning, the company's advertising and customer-relationship management business are driving the most growth. "Geographically, all of our major markets experienced solid organic growth," said Mr. Wren. "This performance is particularly notable given the worsening of economic and capital market conditions since our last earnings call. We're watching these events carefully to anticipate the impact they may have on our business. While we remain cautious about the economy, we are encouraged by our discussions with our clients," who he said are continuing to invest in marketing their brands and look for agency partners to help find innovative ways differentiate themselves.

Mr. Wren specifically called out markets such as Russia, Poland and the Czech republic, Germany, and U.K. for turning in solid performances in the third quarter, while the stragglers were the Netherlands, and markets which are in turmoil such as Greece and Japan. He noted that over 22 % of Omnicom's revenue is currently coming from Asia, Latin America and developing markets, versus 18% this time last year.

The quarter was marked by the closing of acquisitions that will give Omnicom a deeper presence in rapidly growing markets. Among the deals it completed in the quarter were: Sampark Group, a public relations shop in India; Biz Group, an integrated marketing firm in Vietnam; Touchcast, a digital brand-activation group out of New Zealand; and Jump, a direct mail company in Amsterdam.

Omnicom Group's chief financial officer, Randy Weisenburger, also spoke on the conference call this morning and noted there could be more acquisitions to take place before the end of the year.

The company has previously stated it has an objective of getting back to pre-recession margin levels by 2012; that means a target of more than 13% EBITA margin, if measuring by 2007 levels. Asked by analysts if they were confident they can get there, both Messrs. Wren and Weisenburger gave a green light and said they were confident Omnicom can get there.