2nd quarter results: Omnicom posts 15% profit rise

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Omnicom Group posted another strong quarter, aided by continued strength in its U.S. business and improvement in its European operations.

The U.S. market showed strong performance during the quarter, as well as Asia, South America and Africa, President-CEO John Wren said, adding that European markets remain mixed, but their economies appear to have stabilized. In a conference call with analysts, he said the recovery in the region is still slow, but Germany, France and the Netherlands showed progress in the quarter. The U.K. has "uncertainty in the marketplace," and is growing, but only modestly, he said.

"If this recovery follows others, the continents will come back into line over the course of coming quarters. But right now, at least it's stabilized."

Omnicom-parent of BBDO Worldwide and DDB Worldwide-posted $206.1 million in net income during the second quarter, a 15% increase over the same period last year. Revenue rose 12% to $2.41 billion, led by an 11% increase in domestic revenue to $1.31 billion, and a 13% increase in international revenue, to $1.1 billion. On an organic basis, factoring out currency exchange and acquisitions, revenue increased 6%; acquisitions accounted for 2.5 percentage points of revenue growth, while currency fluctuations added 3.5 percentage points.

Growth also came from across disciplines, with traditional advertising revenue up 12.3%, helped by strong performance in media planning and buying. Marketing services were up 11.8%. Within marketing services, specialty communications improved 17.8%, driven by strong performance among Omnicom's health-care agencies, while customer relationship management revenue was up 10.3%, said Chief Financial Officer Randall Weisenburger. Public relations revenue, which only began to grow in the second half of 2003, showed accelerating improvement, up 10.5% after rising 7.8% in the first quarter, Mr. Weisenburger said.

The report included restated results for the second quarter and first half of 2003, to conform with rules regarding the expensing of stock options used as employee incentives. Management downplayed the importance of the accounting changes, although executives said number-crunching has taken some attention away from potential acquisitions.

Acquisition activity is always slow in the first half, but there are candidates in the pipeline, Mr. Weisenburger said. Much of the financial staff has been consumed with implementing accounting and reporting mandates within the Sarbanes-Oxley Act and has not been available for due diligence on deals, he said.

Fast Facts

Omnicom Group (OMC)

Second Quarter Results

Revenue: $2.4 billion, up 12%

Net Income: $206.1 million, up 15%

Source: Company reports. Change is vs. last year.

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