Omnicom Posts Nearly Flat First-Quarter Profit

CEO John Wren Cites Slow Rebound as Markets Improve

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NEW YORK ( -- Omnicom Group, the world's No. 2 advertising holding company, posted nearly flat profit for the first quarter of 2010, as Omnicom CEO John Wren said the business environment continues to "stabilize and improve."

John Wren
John Wren
Net income for the first three months of the year fell 0.7% to $163.4 million from $164.5 million in the first quarter of 2009. Worldwide revenue in the same period grew 6.3% to $2.92 billion from $2.75 billion compared to a year ago.

Omnicom -- the parent of networks including BBDO Worldwide and DDB Worldwide, domestic shop Goodby Silverstein & Partners and media agency OMD -- derives about 55% of its business from the U.S., more than 25% from Europe, and the remainder a mix in Asia, Africa and the Middle East.

Of those areas, the company said U.S. performance was better than expected for the first quarter, and markets in Asia were strong but business continues to be weak in Europe and the outlook there unclear. To that end, the company since the fourth quarter has stepped up hiring in emerging markets, but is relooking at staffing levels in underperforming areas. "Right now what we're doing from a severance point of view is taking a hard look at Europe because those markets have been declining," Mr. Wren said.

Omnicom is the second major advertising holding company to report financials this week, and its statements echoed those made by French firm Havas yesterday.

"We're starting to see rebound in some of the hardest hit areas from the downturn," said Mr. Wren, who cited customer-relationship marketing, public relations and media as areas that have shown "fairly strong organic growth." Activity around the Winter Olympics and increased spending by financial and technology companies have led to some renewed momentum for Omnicom's events and sports marketing business, he added. In contrast, he said recruitment marketing is an area "that has not yet rebounded."

In terms of spending by marketing sector, auto remained the toughest segment, Omnicom's chief financial officer, Randy Weisenberger, said during the call. In terms of the loss of longtime client Chrysler, he said that while that contract technically expired at the end of January, Omnicom agencies provided "transition services" and that revenue "didn't really go away quite as fast as we expected it to." But that account loss is anticipated in the second quarter of 2010 to amount to a 1% revenue loss.

In response to a question from an analyst, Mr. Wren cautiously addressed the move by two of Omnicom's biggest marketers, PepsiCo and Anheuser-Busch InBev, to combine their $1.15 billion media budgets to get better prices from broadcast, magazine and outdoor sellers.

"Some of our clients, Pepsi being one of them, Anheuser-Bush also being one of them, have taken it up on themselves to see if they can reinvent the way they do business," Mr. Wren said, noting the companies have previously teamed in the purchasing of raw materials. "That collaboration seems, from my knowledge of it, which is somewhat limited, as being very productive for both of those organizations."

He suggested that the consolidation of the two media budgets haven't, at least so far, diluted Omnicom's media fees: "We're still doing the same amount of work we were doing in the past and we're collaborating with this joint team."

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