Omnicom CEO Says Too Early to Tell If 2016 Will Bring More Major Media Reviews
February 09 2016 - 1:10PM
Dow Jones News
By Nathalie Tadena
Advertising holding company Omnicom Group Inc. said it's too
early to tell whether 2016 will bring another wave of major media
reviews.
An unprecedented number of large marketers, with an estimated
$25 billion to $30 billion in media billings, put all or parts of
their media accounts into review in 2015, in an attempt to cut back
on costs or to test their agencies' digital chops. The wave of
reviews left major advertising agencies like Omnicom competing for
accounts to hold on to or win over major sources of revenue.
"Whether the pace of 2015 continues into 2016 it is too early to
say, but we will not be surprised if the patterns continue,"
Omnicom Chief Executive John Wren told analysts on the company's
earnings call Tuesday, after reporting b etter-than-expected
fourth-quarter results.
He noted there are only a few minor accounts currently in review
"that are more typical of a normal review year."
In December, Omnicom won the bulk of Procter & Gamble's
media planning and buying account in North America-- the most
high-profile review of the year as Omnicom beat out Publicis
Group's Starcom Mediavest Group, which previously handled the
lion's share of the account. Omnicom is launching a third media
buying unit to handle the P&G account.
Like the other major advertising companies, Omnicom has been
bolstering its digital, analytics and programmatic offerings to
keep up with changing consumption habits and better serve clients.
The company noted its Accuen programmatic unit reported $45 million
in revenue growth for the quarter.
The owner of agencies including DDB, BBDO and TBWA reported that
organic revenue--which excludes currency impacts, acquisitions and
divestitures--rose 4.8% in the fourth quarter, surpassing analysts'
estimates of 4% organic growth. Omnicom posted revenue growth
across most of its regional markets, led by Asia Pacific. By
discipline, only Omnicom's advertising revenue increased on an
organic basis, while organic revenue declined in its CRM, public
relations and specialty communications businesses.
The company also signaled its pace of dealmaking may be picking
up. Omnicom's DDB recently acquired Brazilian agency Grupo ABC, and
its BBDO network recently acquired a majority stake in fashion
marketing powerhouse Wednesday Agency Group .
"To the extent we can find acquisitions that fit strategically,
culturally and pricing makes sense, we're going to continue to look
to do more acquisitions rather than less," Chief Financial Officer
Phil Angelastro said. "We expect that activity will pick up...And
we've got a pipeline that we continue to pursue."
Mr. Angelastro said the company doesn't expect any change to its
capital allocation strategy. There will be less free cash to use to
buy back shares should deals happen, but the company will continue
to deploy the cash through buybacks as it has done in the past if
deals don't materialize, he said.
"Looking forward, the consistency and diversity of our operation
and results combined with our very strong liquidity and balance
sheet will allow us to capitalize on opportunities when they
arise," Mr. Wren said.
Overall, Omnicom's profit increased slightly to $331.6 million,
or $1.35 a share, from $329.5 million, or $1.30 a share, a year
earlier. Analysts polled by Thomson Reuters had projected per-share
earnings of $1.33 a share. Revenue fell 1% to $4.15 billion,
including a 5.6% headwind from foreign exchange rates.
Omnicom is aiming to improve its margins by 30 basis points this
year and said it is looking to drive greater cost efficiencies in
areas such as information technology , real estate, back office
services and purchasing.
Omnicom shares rose 2.8% to $71.67 in midday trading.
Write to Nathalie Tadena at nathalie.tadena@wsj.com
(END) Dow Jones Newswires
February 09, 2016 12:55 ET (17:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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