Omnicom Endures Rough Q3

NEW YORK Omnicom Group, hit with steep revenue declines in the automotive category, sports and event marketing, recruitment and branding/design, said net income dropped 22 percent in the third quarter. Those four areas accounted for just over half of the 10.7 percent decline in organic revenue during Q3.

The holding company reported net income of $165.6 million, or 53 cents a share, down from $213.6 million, or 68 cents a share a year earlier.

Overall revenue decreased 14 percent to $2.84 billion.

In an investor conference call, Omnicom CEO John Wren (shown above) said the company’s business is “showing signs of stability” with recovery under way in developing markets like India, China, the Middle East and Africa. Most of the problematic business sectors heavily skew toward the U.S., and if they were removed from the results, Omnicom’s American operations performed better than those in Europe. 

Wren said that flagship client Chrysler — which is looking at agencies beyond Omnicom creative shop BBDO and media company PHD — would contribute 1 percent of 2009 revenue, down from its previous double-digit standing. Earlier this year, the company said the automotive sector accounted for 13 percent of revenue, though that number includes clients other than Chrysler.

Responding to questions from analysts about Chrysler, Wren said: “We believe it is at risk, but [Omnicom agencies are] engaged in a number of other automotive pitches.” He also said the company continues to honor its Chrysler contract, which ends in January, and “hopefully there are not significant changes.”

Automotive revenue at Omnicom was down 30 percent, year-over-year, as was sports and event marketing. Recruitment advertising was off 45 percent and branding/design slipped 25 percent.

Severance costs in the third quarter totaled $33 million and $102 million so far this year.

Project work, over the course of the year, accounts for 40 percent of Omnicom’s revenue. The fourth quarter is a key time for project work as clients come to the end of their budgetary cycles. Wren said the company won’t know until mid-November what to expect after clients made drastic cuts last year in the wake of the global financial crisis. Going forward, Omnicom’s operating results should improve given easier comparisons to that year-earlier period.

See also:

“Executive Shifts Muddy Chrysler Review”

“MDC Q3: Earnings Rise as Revenue Falls”

“Some Light, But How Long Is the Tunnel?”