Omnicom Boosts 3Q Profit 11%

NEW YORK Omnicom Group today said its third-quarter global net income improved 11 percent to nearly $162 million, or 90 cents per share, on a 9 percent revenue increase to $2.52 billion, compared to the same period a year ago.

Domestic revenue for the third quarter rose 13 percent to more than $1.4 billion, while international revenue improved 3 percent to $1.1 billion, the company said.

For the first nine months of 2005, net income rose 11 percent to $538 million on an 8 percent global revenue increase to more than $7.5 billion, compared to the year-ago period.

Domestic revenue so far this year is up 10 percent ($4.2 billion) and international revenue has increased 6 percent ($3.4 billion).

Several major account wins, including Bank of America and Lowe’s home-improvement centers, have driven the company’s strong performance so far in 2005. BofA selected a team of Omnicom shops (including BBDO and OMD) for its $600 million account in August; BBDO and OMD scored Lowe’s $315 million business in September. Both additions came following reviews.

Omnicom CEO John Wren during a call with analysts characterized the company’s 3Q new-business performance as “the best in our history,” despite weakness in the Netherlands and Germany. CFO Randy Weisenberger said net new business in the quarter was about $2 billion, compared to $950 million in the third quarter of 2004.

Weisenberger said organic growth was up 8.5 percent or nearly $200 million for the quarter and up 7 percent for the nine months ending Sept. 30.

“All the areas of our business continue to perform well except for public relations which was flat,” said Wren. He noted, however, that the sector performed well over the nine months and said it appears to be back on track this month.

Omnicom’s business growth continued to move toward marketing services with 57 percent of its revenue in those disciplines and 43 percent in traditional advertising, Wren said.

Most of the company’s business continues to be done in the U.S., with 57 percent of Omnicom’s revenue and assets in the U.S. and 43 percent overseas.

Responding to an analyst’s question about what clients are saying for 2006 in terms of their spending, Wren said there have been no significant changes in the media mix except for the Internet sector, which he expects to increase “quite a bit year over year.”

One analyst asked Wren about compliance issues in light of their impact on competitor Interpublic Group and whether Omnicom has to adjust its reporting as a result.

Wren said Omnicom has been unaffected and attributed some of IPG’s restatement issues to its wider presence in more countries, noting that while Omnicom operates in 30 countries, IPG is in 130 countries.

Weisenberger added that Omnicom’s clients conduct regular audits of the company’s activities and said, “We’ve got a high degree of confidence that everything is being done in accordance with our contracts.”

When one analyst wondered if Omnicom’s third-quarter success was attributable to greater account review activity, Wren responded, “We can’t control who puts their accounts into review. I’m far too superstitious to predict our success.”