CEO Says Clients Are 'Prepared to Increase Spending'

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NEW YORK ( -- Omnicom Group saw a sharp jump in net income for its first quarter, partly from non-recurrence of goodwill charges, the agency holding company reported today.

Omnicom posted first-quarter net income of $128.6 million, a 34.9% increase from $95.3 million in 2001 and an 8.2% increase in revenue to $1.73 billion, from $1.6 billion in 2001.

The increase was partly due to non-recurrence of goodwill charges and the conversion of a convertible bond issue into equity in late 2001; eliminating those factors, net income rose 9.7%. Omnicom said the gains represent its 43rd consecutive quarter of revenue and earnings growth.

10% revenue growth predicted
President-CEO John Wren reaffirmed

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Omnicom's forecast of 10% revenue growth for the year, saying year-over-year comparisons will get easier in the second half, since the company only began to feel the recession in the second half of 2001. He wouldn't forecast an organic growth rate, saying it depends on client spending, a factor that remains "too close to call."

"In the first quarter we didn't see any dramatic evidence of increased spending," Mr. Wren said. One good sign is that negotiations in the TV upfront "are far more positive this time," which should help the second half, he said.

'No one wants to be first'
"There are quite a number of clients who are really prepared to increase their spending, but no one wants to be first," Mr. Wren. The market needs a catalyst such as Procter & Gamble's decision in 1993 to increase spending, which led the end of the last recession, he added.

Revenue growth was a result of a strong, $1 billion-plus new business drive for the quarter, Mr. Wren said. Organic growth was 3.7%, with acquisitions supplying 5.6% growth and foreign exchange reducing growth 1.1%, he said.

Traditional media revenues, 45% of Omnicom's total, grew 9.1%, while marketing services grew 7.5%; U.S. revenues grew 14%, while international revenues where flat. Among marketing services, CRM revenues rose 14.6% and specialist communications 12.8%, mainly thanks to growth in health-care advertising. Meanwhile, public relations was down 9.3% and remains "the biggest challenge," Chief Financial Officer Randall Weisenburger said.

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