"As many of you know, we've been very conservative," Omnicom President-CEO John Wren told analysts listening in on the company's earnings conference call this morning. "I'm still hopeful, though, that we'll start to see pricing come more in line with our stark expectations."
"One positive side of the economic slowdown is a reduction in the financial buyers interested in our industry," he said. "Additionally, some of our competitors who have aggressively paid -- in our opinion -- uneconomic prices for some of their acquisitions have weakened their balance sheets and will be limited going forward in their ability to do acquisitions. As a result, we're hopeful that pricing will become more sensible, and we expect that we'll do more deals," Mr. Wren remarked.
The company would not specify which competitive deals Mr. Wren was speaking of. But it's likely he was referencing WPP Group's purchase of 24/7, Publicis Groupe's acquisition of Digitas and General Atlantic's stake in AKQA.
As for Omnicom, "We don't have anything teed up that you'll see in the third quarter," Mr. Wren said, but the company does have targets in sight it plans on pursuing more aggressively. Omnicom Chief Financial Officer Randy Weisenburger, also on the call, was vague about the types of firms the holding company wants to buy, saying it is looking to fill holes or vacancies in its current capabilities, both in terms of geography and servicing client needs.
Omnicom defies trends
Given the state of the economy and marketers battening down the hatches when it comes to spending, Omnicom reported a stellar 12.2% increase in profit to $515.6 million for the first half of 2008, compared with the first six months of 2007, attributing the boost to strong organic growth and a solid new-business record.
The holding company lifted net income in the second quarter 11% to $307 million, while worldwide revenues in the quarter grew 11.2% to $3.5 billion, compared with the same period in 2007. The biggest chunk of revenue came from the CRM category, which expanded 17.2% in the quarter to $1.3 billion.
Domestic revenue growth was strong "despite the difficult operating environment for many of our clients," and internationally was also strong, Mr. Wren noted, especially in emerging markets of Asia, the Middle East and Eastern Europe and Latin America.
Omnicom witnessed slower growth in Italy, the U.K. and Spain, though, and did experience some ongoing negative impact stemming from last year's loss of AT&T and Dell business. The holding company remains cautious about performance in the back half of 2008, with the automotive sector and financial-services categories expected to continue to present a challenge, said Mr. Wren.