Omnicom Reports Profits up 13% for Second Quarter

CEO Wren Says Company Margins to Return to Pre-recession Levels by 2012

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Omnicom Group's second-quarter net income rose 13.1% to $275.1 million, compared to $243.3 million in the same period in 2010. The growth is nearly half of what it reported in the first quarter, which saw a 23.6% increase over the first quarter of 2010.

"We're pleased to announce strong operating results despite the challenging worldwide economic backdrop," Omnicom President-CEO John Wren said on a conference call with analysts this morning.

Worldwide revenue for Omnicom, home to agencies such as DDB Worldwide, BBDO, OMD and PHD, rose 14.7% to $3.5 billion, an increase from the $3 billion it achieved in the year-ago period. Organic revenue was up 7.2% to $218 million.

Domestic revenue for the quarter increased 7.8% to $1.8 billion, on par with the $1.6 billion in the 2010 period. International revenue increased 22 .7% to $1.7 billion, compared to $1.4 billion in the second quarter of 2010.

Although the holding company in the U.S. saw balanced revenue month to month, Mr. Wren said forecasts for the region are somewhat unpredictable. "There's a fair amount of uncertainty in the U.S. given Congress is in action and people not knowing quite how to plan in the near term. We remain a victim of those actions, but short of that everybody has been very consistent so far in terms of planning for the balance of the year," he said.

Overall, Mr. Wren said that by 2012 he expects to have margins reaching levels they were at in 2007, prior to the recession.

Despite Japan's losses from the fallout of its crisis, the company has high hopes for Asia, especially Greater China, where it introduced a new operations structure to enhance global marketing for Chinese clients, Mr. Wren said. In euro currency markets, which saw $662 million in revenue -- a 7.8% year-over-year increase -- results continue to be mixed with moderate growth in Germany but flat results in France. Ireland and Greece, mostly due to government-induced and economic troubles, came out negative in the second quarter. The U.K. saw $304 million in revenue, a 16.8% increase over the same period in 2010. Latin American and the Middle East saw double-digit organic growth.

"We just saw a very steady performance in all markets that weren't under unusual stress like Japan and Greece," he said. "We're continuing to execute against strategic objectives of building a presence in rapidly growing markets."

Though acquisitions were slow to close this quarter, Mr. Wren expects them to pick up in the second half of the year, especially in developing markets.

Of the disciplines, advertising led the charge with $1.62 billion in revenue, an 18.5% increase over the same period in 2010. CRM, or customer-relationship marketing, was a close second with $1.25 billion and a 15.1% increase. Public relations achieved 7.1% year-over-year growth to $311.7 million.

Net new-business wins accounted for just more than $1 billion in revenue. Within the disciplines, automotive is experiencing perhaps the most exciting growth, now that Omnicom has "cycled through the loss of Chrysler," said Mr. Wren. Automotive represents 8% of total revenue, compared to 7% in the second quarter last year. Other industries that performed well include financial services, technology and travel and entertainment.

In March, PR firm Brodeur Partners bought back a majority stake from Omnicom, which also houses PR agencies Ketchum, Fleishman-Hillard and Porter Novelli.

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