Omnicom's ad landscape ramped up toward the end of the year. Its net income in the final quarter was up 10%, compared with 5% for the year. Fourth-quarter revenue grew 18.3%, the strongest fourth-quarter showing since 2000, while the annual increase was 14%, according to statistics from William Blair & Co.
Omnicom, the biggest agency holding company, continues to grow faster than the market. Robert J. Coen, senior VP-director of forecasting at Interpublic Group of Cos.' Universal McCann, estimated worldwide ad spending rose 4.6% last year and that worldwide spending this year will increase 5.8%.
In a conference call with analysts after results were reported Feb. 17, Omnicom President-CEO John Wren said the first quarter 2004 looked to be off to a good start, with an uptick in new business. He said increased client spending and merger activity is likely to boost traditional advertising and marketing services. Chief Financial Officer Randall Weisenburger said acquisitions would continue to be important as the pipeline is fairly full, though Mr. Wren said the company would remain focused on organic growth.
Analysts were bullish. "With the prospects of improving organic revenue growth, steady net new-business trends and some operating margin stability on the horizon, we believe [Omnicom] is positioned for a solid 2004 and a better 2005," Lauren Rich Fine, analyst for Merrill Lynch, said in a report. She acknowledged, however, that the economy and ever-tightening client compensation could temper that showing.
Omnicom's net income for 2003 rose to $675.9 million from $643.5 million a year earlier, and worldwide revenue rose to $8.6 billion from $7.5 billion, the company announced. For the final three months of last year, net income rose 10% to $221.3 million, while worldwide revenue increased 18.3% to $2.5 billion. Per share earnings rose to $1.17, from $1.08, in the final quarter, while year-end EPS were $3.59 compared with $3.44 a year earlier.
Analysts said that while net new business last year for Omnicom was off 4% to $4.1 billion-the lowest amount since 1999-the 2003 decline had slowed and actually exceeded expectations. With blue-chip agencies such as BBDO Worldwide, DDB Worldwide, TBWA Worldwide and the media agency OMD, Omnicom may fare better with organic growth and new business than other holding companies whose agencies have less cachet.
Marketing services continued to contribute more to the top line. The world's largest advertising holding company said that traditional media advertising was responsible for 43.4% of company revenue last year, while marketing services accounted for 56.6%, thanks to activity on customer relationship management as well as health care. Mr. Wren said public relations was improving, up 3.7% for the year after being down for two years, and that CRM and health care had contributed as well.