Omnicom Posts Double-Digital Net Income Gains in Q4 and All of 2014

Advertising operations, North American region drive organic growth

Omnicom Group said today that organic revenue in the fourth-quarter increased nearly 6 percent, driven by operations in its largest operating region, North America. Overall global revenue climbed 3 percent to $4.2 billion in the quarter.

Leading that growth was advertising, where Omnicom's media operations were a driving force behind the 8.5 percent increase in organic revenue. Specialty communications, particularly in healthcare, showed a 9 percent increase and public relations rose 8.5 percent. CRM operations, however, posted flat results.

In North America, organic growth climbed 8 percent, followed by the U.K. with a 6 increase. In the Eurozone and other European countries, it rose 1 percent, while in the Asia-Pacific region and in Africa and the Middle East, the gains were 3 percent and 14 percent, respectively. In contrast, Latin America had no organic revenue growth.

At a global macroeconomic level, Omnicom chief John Wren largely attributed the strong organic growth to recent declines in oil and commodity prices which are boosting consumer spending. North America, he noted, has been the biggest beneficiary of that trend.

On the downside, Wren underscored the divergence in Central Bank actions across the globe where they have been lowering borrowing costs to try to kick-start growth in their economies. The result has been the decline in currencies versus the dollar in all of the operating regions for the U.S.-based company, which derives 46 percent of its revenue outside the states. That shift in exchange rates resulted in a 3 percent reduction in fourth-quarter revenue and will continue to hit Omnicom's reported results. Wren estimated a foreign exchange impact of 5.5 percent in the current quarter and estimated a possible 5 percent hit for the entire year.

Net income in Q4 jumped nearly 10 percent to $329.5 million. Results in the period include $13.3 million of pre-tax charges reflecting professional fees related to the company's proposed merger with Publicis Groupe. (That deal was terminated last May.) In the 2013 fourth quarter, Omnicom's net income declined 2 percent after results were impacted by professional fees related to the Publicis merger.

Full-year organic revenue growth increased about 6 percent while worldwide revenue rose 5 percent to $15.4 billion. The company saw an 11 percent spike in net income to $1.1 billion.

Results in 2014 include $8.8 million of pre-tax charges in connection with the proposed Publicis merger  as well as the recognition of an income tax benefit of $11.4 million related to previously incurred merger expenses.

Last year, Omnicom predicted full-year 2014 growth of 4 percent and ended up overdelivering at 6 percent. Wren, typically prudent in predicting full-year performance results this early in the year, said he is expecting 3.5 percent organic growth in 2015. Citing the slowdown in the global economy and other uncertainties and unrest, he added:  "I'm cautiously optimistic and we'll do our damndest to beat" the estimate.