Omnicom’s revenue rises as clients spend more

Wednesday, 23 July 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Omnicom Group Inc, the largest U.S. advertising company, reported better-than-expected quarterly revenue and profit as ad spending rose, particularly in the United States. U.S. ad spending has been gaining momentum as consumer goods companies try to encourage reluctant consumers, suffering from stagnant wages, to crack open their wallets. The growing popularity of private label brands has also pushed national brand owners such as Kraft Foods Group Inc to increase marketing budgets. Global ad spending rose nearly 6% to $545.4 billion in 2014 and is expected to reach $662.7 billion by 2018, according to statistics website Statista. There had been concerns that Omnicom’s second-quarter earnings would suffer because management was focused on completing a $35 billion merger with France’s Publicis Groupe SA . That deal fell apart in May. The two advertising giants lost business worth more than $1.5 billion in April due to uncertainty over the deal, Pivotal Research analyst Brian Wieser has said.

Publicis warned earlier on Tuesday it would be “very difficult” to meet its annual organic sales growth target after a second-quarter slowdown caused in part by the failure of the planned merger. Omnicom, however, reported a 6.4% rise in revenue to $3.87 billion in the quarter ended June 30, topping the average analyst estimate of $3.8 billion. The company, whose clients include McDonald’s Corp Adidas AG and Apple Inc, said ad revenue increased 10.5% in the quarter. Revenue from the United States, which accounts two thirds of the total, rose 7.8%, while international revenue increased 4.9%. Net income available for common shareholders rose to $318.9 million, or $1.23 per share, from $281.7 million, or $1.09 per share, a year earlier. Excluding items, the company earned $1.20 per share, compared with the average analyst estimate of $1.17 per share, according to Thomson Reuters I/B/E/S. Omnicom’s operating margin slipped to 14.2%, from 14.4% a year earlier. The deal with Publicis was expected to boost the company’s margins. Smaller rival Interpublic Group of Cos Inc reported better-than-expected quarterly revenue last week, boosted by strong growth in the UK and higher ad spending in its core U.S. market.