Omnicom Reports Margin Growth, on Track for 2012 Goal

John Wren Notes Europe Still Cause for Concern

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Omnicom Group announced a 3.7% boost to its operating income in the second quarter, as well as 2.8% growth in net income.

Revenue was up 2.1% to $3.56 billion, due largely to growth in the U.S. and in developing markets such as Russia and Turkey. However, during an earnings call, CEO John Wren noted that Europe continues to threaten the business.

John Wren
John Wren

"For the second half, we're cautiously optimistic about revenues, but we realize there are risks," he said. "Europe continues to kick a can down the road so there's constant uncertainty." He also referenced uncertainty in the U.S. economy, especially during an election year, as well as moderating growth in Asia.

The U.S., which accounts for 52.2% of the company's revenue, grew 5.4%, while international revenue decreased 1.3%, dragged down largely by Europe. The euro currency markets declined 12.9%.

However, the U.K. performed well, with 2.3% growth. It's a "consistently strong market" and during this quarter, it saw improvement through acquisition, said Mr. Wren. He was referring to the acquisition of U.K.-based ad agency Adam & Eve, as well as public-affairs shop Portland.

Of the disciplines, advertising performed best with 3.4% growth. CRM grew 2.1% and PR was up 2.2%. Though not impressive, that 2.2% is an improvement over last year. In the first quarter, Mr. Wren had pointed out that the PR businesses had showed growth for the first time in several quarters. In this quarter, specialty services decreased 5.7%.

By industry, the holding company celebrated growth from the consumer, automotive and retail sectors, but telecom was down 9.9%. The company also saw significantly reduced spending by a number of leading pharmaceutical accounts, noted Mr. Wren.

In a forward-looking statement, the company said it's on track to delivering its 2012 margin target to match its 2007 operating margin of about 13%.

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