6.3% Organic Decline for Omnicom in Q4

Omnicom Group, hit by declines in its automotive, sports/event marketing and recruitment businesses, said 2009 fourth-quarter profit fell 15.3 percent to $229.6 million from the year-earlier period. Earnings per share dropped to 73 cents from 87 cents.

Omnicom CEO John Wren said those three sectors accounted for 100 percent of the 6.3 percent drop in the company’s Q4 revenue — to $3.27 billion — when viewed in terms of organic growth, a measure that factors out the impact of currency fluctuations, acquisitions and related items.

In non-organic terms, the quarterly revenue dip was 3 percent.

In a call today with Wall Street analysts, Wren and CFO Randall Weisenburger voiced optimism about 2010 after a year that was the most difficult in their tenures at the helm of the company.
 
“We believe the worst of the recession and its impact are behind us,” said Wren. “We believe most of our clients will increase spending in the second half.”
 
Weisenburger said Omnicom is coming out of the “toughest economic period in our company’s history,” adding that he believes the company could return to positive organic growth in the second quarter and more certainly will do so in the second-half of the year.
 
Domestic revenue for the fourth quarter decreased 7.3 percent to $1.6 billion, while international revenue rose 1.5 percent to $1.6 billion. Automotive, events/sports marketing and recruitment accounted for 13 percent of Omnicom’s business in the fourth quarter; the remaining U.S. business sectors were flat in Q4. This month Omnicom ended its relationship with Chrysler, which had accounted for 1 percent of the company’s revenue decline.
 
Wren said Omnicom would resume a more aggressive acquisitions program this year as well as backing startup companies. Other priorities in utilizing cash include increasing dividend payouts — which the company’s board will consider today — and buying back shares.
 
Analysts welcomed the improved results at Omnicom, which follows Havas’ release of fourth-quarter results yesterday that showed less of a decline in organic revenue than in previous quarters.

Matthew Chesler, an analyst with Deutsche Bank Equity Research, sees the numbers as a barometer of an industry uptick: “OMC’s good top-line result follows Havas . . . and serves as a second data point of agencies beginning to see the recovery.”
 
For all of 2009, Omnicom’s net income dropped nearly 20.7 percent to $793 million, with earnings per share sliding 19 percent to $2.53. Worldwide revenue decreased 12.3 percent to $11.7 billion, with U.S. revenue declining 10.3 percent and international revenue off 14.3 percent.

In organic terms, the company’s global revenue slide for ’09 was 8.7 percent.

Headcount was 63,000 at the end of ’09 compared to 68,000 at end of ’08.

–with Andrew McMains