Omnicom reported its strongest increase in organic revenue so far this year, notching a 6.7 percent gain in the third quarter. In the first nine months of 2010, Omnicom said organic revenue -- which factors out the impact of acquisitions and currency fluctuations -- increased 5 percent.
Speaking to financial analysts, John Wren (shown), Omnicom's chief executive, sounded upbeat about the results, saying he was "pleasantly surprised" by growth in the U.S. during the quarter and renewed strength in parts of Europe like the U.K. and France. However, he cautioned that while marketers appear to be committed to restoring top-line growth, he is still waiting to see how 2011 marketing budgets will be impacted by the outcome of the U.S. midterm elections and continuing unemployment.
Organic revenue in the quarter would have been 1.5 percent higher if not for the drawn-out loss of BBDO's Chrysler business, an account that still has two more quarters to cycle completely out of the company's balance sheet. (However, Wren said that the automotive category, which accounts for 11 percent of Omnicom's business, grew 8 percent in the quarter.)
In real-money terms, worldwide revenue increased 5.5 percent in the third quarter to $2.99 billion; domestic revenue increased 8.4 percent to $1.6 billion. International revenue increased 2.3 percent, from the year-earlier quarter, to nearly $1.4 billion.
Net income rose 5.4 percent to $174.6 million; on a diluted basis, income increased 7.5 percent to 57 cents a share.
Wren said that business improved across all operating areas in the third quarter, with the exception of Omnicom's specialty line of businesses, which faced more difficult 2009 operating comparables. Among marketer categories, most posted increases in spending, except the travel and entertainment industries, which posted "modest" declines compared to the year-earlier quarter.
Looking ahead, Wren said the company hopes, by 2012, to restore margins to pre-recession levels. Omnicom is also looking to increase acquisition and alliance activities, particularly in emerging markets and to make divestitures of slow-growth and non-core businesses.
In the quarter, organic revenue in the U.S. climbed 8.4 percent; in Euro-currency markets, 1.2 percent; the U.K., 8.9 percent; and other parts of the world, 7.1 percent. Across operating disciplines, organic growth in advertising rose 6.5 percent; CRM, 7.3 percent; PR, 5.4 percent; and specialty, 6.8 percent.