Omnicom profits fall in Q3

22 October 2009

NEW YORK: Omnicom Group, the agency holding company, registered a 22.5% decline in net profits, to $165.6 million (€100.3m; £99.7m), in the third quarter of this year, as the financial crisis continued to exert pressure on advertisers' budgets.

The marketing services conglomerate saw its global revenues fall by 14.4%, to $2.8bn, in Q3, including a decrease of 13.2%, to $1.5bn, in the US, and a drop of 15.8%, to $1.3bn, internationally.

Net profits have also tumbled by 22.7%, to $563.5m, for the nine months to September, with global revenues down by 15.4%, to $8.5bn, in this period.

Within this, Omnicom's international operations recorded a slide of 19.6%, to $3.9bn, compared with a more modest contraction of 11.4%, to $4.5bn, in its home market.

By sector, its advertising operations, which contribute 43.4% of revenues, were off by 11.6% in Q3 – or 8.4% on a like-for-like basis – to $1.2bn.

CRM, which delivers 38.2% of sales, also slipped by 16.2% from July to September, to $1.1bn, as organic totals shrank by 8.4%.

Its PR and "Speciality" operations delivered $266m and $256m in revenues respectively, a like-for-like slowdown of 11.3% and 8.5% in turn.

For the year to date, revenues from Omnicom's advertising operations have declined by 13.5%, to $3.7bn, with CRM down 16.1%, to $3.1bn, PR by 16.7%, to $798m, and Speciality by 19.6%, to $786m. On a conference call with investors, John Wren, Omnicom's ceo, argued that "on an overall basis, client spending while significantly down from 2008, is showing signs of stability."

"While the recession has resulted in a significant reduction in advertising and marketing expenditures, our agencies have done a very good job adjusting costs and our service capabilities to this new environment," he added.

In Europe, Wren predicted the recovery would be "slow", while the BRIC nations and other developing countries "are showing signs of recovery, and we are hoping for faster growth in these markets as we move forward."

By contrast, more advanced markets in Asia, such as Japan and Korea, also remain "weak", but, more positively, in the US, "with the exception of several sectors, client spending has stabilised and there are even a few signs of positive growth," Wren said.

More specifically, Wren said the automotive sector has continued to cut back, with sports and events marketing also down by 30%, recruitment advertising by 45%, and branding and design, which are "discretionary" projects that "can be delayed", also off by 25%.

The New York-based firm recently announced the formation of a new specialist unit, Omnicom Digital, responsible for making acquisitions and driving innovation in an area it regards as being a key contributor to its future growth.

Data sourced from Omnicom Group; additional content by Warc staff