Omnicom Beats Expectations for First Quarter

Profits up 14%; Says It's Not Seeing 'Significant Reductions' in Spending

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NEW YORK (AdAge.com) -- The world's largest holding company has yet to see slowdown from a U.S. recession, as it beat analyst expectations to boost profits 14% in the first quarter.
Omnicom Group president-CEO John Wren
Omnicom Group president-CEO John Wren

"The first quarter was a great start for 2008," Omnicom Group president-CEO John Wren said in a conference call with analysts. The company "didn't see any unexpected shifts in client spending patterns," and though it remains "cautious about the economy," it is "not seeing a significant reductions in client spending." Mr. Wren added that non-U.S. growth for the company remains strong.

Net income
Omnicom posted net income of $208.7 million for the first quarter of 2008, compared with $183 million one year earlier.

Worldwide revenue at the holding company -- which is the parent of ad agency networks BBDO Worldwide and DDB and works with marketers such as PepsiCo, McDonald's and Mars Inc. -- climbed 12.5% to $3.2 billion from $2.84 billion in the first quarter of 2007. Domestic revenue in the first quarter grew 7.6% to $1.7 billion, while international revenue jumped 18.3% to $1.53 billion.

About 57% of revenue comes from marketing services broadly, and the remainder from traditional ad agency channels, executives said.

Acquisitions activity picked up during the quarter, with the closing of four deals to acquire a variety of global marketing firms: The Kern Organization of Woodland Hills, Calif., a direct-marketing firm that will become part of the Rapp Collins network; Beltsville, Md.-based A Vista Group, an events design and production company that is a member of the Radiate Group; Brazil-based ad agency Lew'Lara, which is joining the TBWA network and is being rebranded as Lew'Lara/TBWA; and New Zealand interactive agency Shift.

New-business wins
Net new-business wins for the quarter totaled about $1.2 billion in billings.

Mr. Wren acknowledged a lack of big account movement across the industry during the first quarter, stating: "I think it's just a pause ... it will come back."

Among the biggest account moves in the industry so far this year were Omnicom Group's Zimmerman Advertising's win of Pep Boys $85 million marketing account and BBDO's announcement last week of Hewlett-Packard business, which will be attributable to second quarter results. Meanwhile, Omnicom's Chicago-based shop Element 79 last week saw two major PepsiCo accounts worth over $200 million in billings shifted to sibling agencies TBWA, Los Angeles and Arnell Group, New York.
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