Omnicom Revenue Grows, but Publicis Merger May Slide to Third Quarter
Worldwide revenue at Omnicom increased 2.6% to $14.6 billion in 2013, the company said Tuesday morning, and grew 2.9% to $4.06 billion in the fourth quarter compared with the period a year earlier.
Omnicom owns creative agencies TBWA Chiat Day, DDB, BBDO; media buying and planning shops PHD and OMD; and PR shops Fleishman-Hillard and Ketchum, among others. It is in the midst of preparations to merge with Publicis Groupe to create the world's largest agency holding company by a large margin.
The merger now looks likely to take longer than originally anticipated and drag beyond the second quarter of this year, Omnicom said. Last summer, when the deal was announced, the companies hoped to complete their merger by the end of 2013 or within the first quarter of 2014. They passed the antitrust test in the U.S. in November and gained approval from the European Commission in January but are still waiting to hear from Chinese regulators.
Omnicom's total net income for 2013 decreased 0.7% to $991 million, the company said, and net income in the fourth quarter decreased 2.1% to $300.5 million.
Those results include $41.4 million in pre-tax expenses related to the proposed merger over the course of 2013, CEO John Wren and Chief Financial Officer Randall Weisenburger said on an earnings call with analysts. Costs related to the merger amounted to $13.3 million in the fourth quarter, they said.
Excluding the impact of merger expenses, Omnicom's net income for 2013 increased 2.8% to $1.03 billion from $998.3 million in 2012.
'Subdued' recovery for Western Europe
Company growth in most large and developing markets was strong in 2013 and in the fourth quarter, but Western Europe continues to lag behind the others, Omnicom said.
U.S. revenue for 2013 increased 2.8% to $7.6 billion, according to the company. Domestic revenue for the fourth quarter increased 1.6% to $2.1 billion.
"Continental Europe is more a tale of East versus West," Mr. Wren said on the earnings call. "In Western Europe we're seeing great instability with bright spots." Eastern Europe, for example, performed well for both the quarter and the year, led by Russia, he said.
Germany delivered growth for first time in several quarters, while France and smaller countries in the region continued to decline.
The recovery in Western Europe is likely to be "subdued" and "slow" for some time, Mr. Wren said. Agency operations in the UK, however, were strong.
In 2013, organic revenue from advertising increased 4.8% from 2012, specialty communications grew 4.8%, CRM grew 2.1% and public relations saw a 1.5% increase.
But organic revenue from public relations took a dive in the fourth quarter, falling 3.7% from the quarter a year earlier. Fourth-quarter advertising increased 4.1%, CRM rose 6.8% and specialty communications grew 2.5%.
The decline for public relations in the fourth quarter was largely due to the comparison against an "exceptional performance" in 2012, said Mr. Weisenburger. "Although down, performance this quarter was good," he said.
The company added $1.5 billion in net new business for the year. Late last year, Disney shifted its massive media business from a dedicated Publicis group called 4D to Omnicom's media agency network.
Looking forward, the company is aiming for "slight margin improvement with or without Publicis and merger costs aside," Mr. Wren said.