While Omnicom's president-CEO, John Wren, was optimistic about the outlook for the remainder of the year, he cautioned it's not a done deal yet. He warned that growth is mostly due to incremental spending by companies that had already been spending through the downturn and there are no advertising sectors rebounding after being in decline.
An improvement, not a boom
"I don't think the economy has recovered
Omnicom posted $190.7 million in second-quarter net income, up 1.8% from the year-ago period, on revenue of $2.15 billion, up 12.2%. Organic revenue growth -- excluding acquisitions and currency fluctuations -- was 2.6%, the same rate as in the first quarter.
One sign of improvement, Mr. Wren said, is an upturn in corporate merger and acquisition activity. Omnicom itself will likely see more acquisitions in the second half, said Randall Weisenburger, Omnicom's chief financial officer. As the business improves, management will be able to focus more on acquisitions, he said.
Omnicom executives acknowledged that the company bought online shop Agency.com in exchange for its preferred stock in Seneca Investments. Seneca, a partnership backed by Omnicom, was formed by investment group Pegasus Investors II in 2001 after Omnicom traded its partial stakes in 16 online shops to Seneca in exchange for preferred stock. Seneca later bought full ownership of two i-shops, Agency.com and Organic, and restructured them in an attempt to make them profitable. Omnicom bought back ownership of Organic last December.
Mr. Weisenburger said Omnicom retains an interest in Seneca, but he added, "I don't think there's anything else in Seneca that we would like to buy."
Growth in U.S. market
The U.S. market is seeing growth in all areas, except for recruitment advertising, Mr. Weisenburger said. He said public relations, which has been lagging other marketing communications sectors, has stabilized and posted a 1.4% increase in revenue for the quarter. Advertising revenue was up 14.9%, customer relationship marketing rose 17.7% and specialty communications was up 1.1%. The weak recruitment advertising revenue offset partly a strong performance by health-care agencies in Omnicom's fold, Mr. Weisenburger added.