Omnicom Group Posts Flat First-Quarter Profit
Omnicom Group, the world's second-largest ad holding company by revenue, announced flat first-quarter profit. Net income for the period rose just 1% year-over-year, to $204.6 million.
Revenue grew 5%, to $3.3 billion, driven by business in developing markets. During a call with analysts, CEO John Wren said that "revenues exceeded our internal forecasts" and that he's cautiously optimistic about the rest of the year.
"The region most at risk is Europe," said Mr. Wren, noting that with the exception of the U.K., the European markets "experienced only nominal growth."
First-quarter domestic revenue rose 4% year-over-year, to $1.7 billion, while international revenue was up 5.9%, to $1.58 billion.
Mr. Wren was asked by an analyst to comment on the formation last month of Commonwealth, a shop Omnicom built with rival holding company Interpublic Group of Cos. to serve Chevrolet. He largely credited his trust in the leader of one of his agencies, Goodby Silverstein & Partners co-founder Jeff Goodby, for his agreeing to the deal.
Mr. Goodby, whom Mr. Wren noted had been a partner of his since 1989, had asked him to listen "to an interesting concept." He believed that the groups should "get together and form some kind of a new entity to aid in the resurgence of Chevy as the leading global brand," Mr. Wren said. "He asked if we would entertain an unusual situation, which was Commonwealth, and do a partnership with IPG. Knowing and trusting Jeff as much as I do, and knowing the objectives of what they're trying to accomplish, and knowing two out of three of the other creative guys, it was a pretty simple decision for us. It resulted in Michael Roth and I shaking hands and saying we'd make it work."
The financial results suggest that Omnicom, and adland in general, may post more moderate numbers than in 2011 -- when many companies saw sharp increases after relatively low earnings in 2010.
Omnicom's revenue breakdown by industry remained essentially the same as a year ago. Among the categories: food and beverage, 15%; pharma and health, 10%; autos, 8%; and telecom, 7%. PR businesses showed growth for the first time in several quarters, Mr. Wren pointed out.
The company continues to invest in markets outside of North America. On Monday, Omnicom Media Group announced the purchase of NIM Digital, a Shanghai-based agency that opened in 2004 as a digital media-buying operation but has since expanded into creative, search marketing and production services.
During the earnings call, Omnicom Group Chief Financial Officer Randy Weisenberger provided some color commentary on that deal. He said the company had worked on it for more than a year, visiting the country and meeting with executives there several times. "Transactions in that region can take some time," Mr. Weisenberger said. We "have a lot of resources focused on it."
There's more to come. Acquisitions in China and other markets "will accelerate over the course of the year," Mr. Wren said.