Omnicom Posts Second-Quarter Profit of $290 million

Company Chief John Wren Agrees With Rival Martin Sorrell on One Thing: Payment Terms

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Omnicom Group on Thursday reported a small uptick in profit in the second quarter of 2013, results which the company said met internal expectations.

The parent company of creative networks such as BBDO, DDB, and TBWA and media agencies PHD and OMD, posted a 2.4% increase in net income to $289.5 million for the second quarter, up from $282.7 million for the same quarter in the prior year.

John Wren
John Wren

Worldwide revenue increased 2.1% to $3.64 billion from $3.56 billion in the second quarter of 2012. U.S. revenue for the second quarter of 2013 increased 2.4% to $1.9 billion. International revenue increased 1.9% to $1.73 billion.

Also on Thursday, French ad holding company Publicis Groupe posted its quarterly results, posting a bigger comparative jump in profit.

During an earnings call, Omnicom CEO John Wren said that the company's results continue to demonstrate the strength and diversity of the company's business. He added Omnicom is expanding its global footprint and investing in new service areas. Mr. Wren put an emphasis on the importance of digital, noting that a priority for Omnicom is to have strong digital skill sets in every agency. He also pointed out the importance of data and analytics.

Omnicom's net income for the first half of the year increased 1.5% to $494.7 million, from $487.3 million in the same period in 2012. Worldwide revenue for the first half of the year increased 2.4% to $7.04 billion from $6.87 billion in the same period in 2012. U.S. revenue for the six months ended June 30 increased 3.3% to $3.69 billion from $3.58 billion in the same period in 2012.

Analysts on a conference call asked questions about procurement and payment terms and the impact on agencies. Mr. Wren said that procurement has always put pressure on compensation, and that Omnicom has turned away prospective clients because of payment terms. "We're not a bank," he said, adding that competitors agree. (WPP chief Martin Sorrell also recently expressed similar sentiments.) "Anyone who wants to treat us like a bank can go to a bank."

Also during the call, the company was asked questions regarding the prospect of new auto accounts following the Chevrolet loss earlier this year when Goodby, Silverstein & Partners was cut from the Commonwealth cohort created by Omnicom and Interpublic for General Motors. All of the Chevy creative business was consolidated at Interpublic's McCann.

Mr Wren said: "There's no -- not to my knowledge -- big car pitches up at the moment, but I have great confidence in the capabilities of the people who were on the Chevy business that when one does come up, we'll have a very good chance at it."

The company said that with the loss of Chevy, as well as another big account at BBDO, Procter & Gamble's Gillette, quarterly billings fell just short of $1 billion.

Just this week, Pfizer shifted the creative account for Viagra from Dentsu's McGarryBowen to Omnicom's BBDO. BBDO's Chicago outpost, EnergyBBDO, in June picked up the Bud Light business from Translation and Emirates Airline's North American business -- all moves that help offset BBDO's Gillette loss earlier this year.

By discipline, advertising accounted for 48.4% of Omnicom's results in the second quarter, while CRM accounted for 34.5%, PR accounted for 9.2% and specialty, which includes TK, accounted for 7.9%. Year-to-date, advertising made up 48.4% of Omnicom's results, CRM was 34.5%, PR was 9.2% and specialty was 7.9%.

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