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Omnicom Profit Up 10% on Overseas Business

CNBC.com
Tuesday, 13 Feb 2007 | 11:21 AM ET

Omnicom Group, the world's largest advertising services company, said on Tuesday fourth-quarter profit rose nearly 10% as it reaped the benefits of investments overseas, including China.

Omnicom, home to advertising agencies such as BBDO Worldwide and DDB Worldwide, said profit rose to $277.2 million, or $1.62 a share, from $252.6 million, or $1.41 share, a year earlier.

Worldwide revenue rose 9.4% to $3.22 billion, boosted by a broad mix of media services in the U.S. and overseas. Organic revenue, a closely watched industry benchmark that excludes foreign currency impact and recent acquisitions, rose 6.6%.

Shares of Omnicom, having risen about 25% in the last year, fell earlier after the fourth-quarter results matched, but failed to beat, market expectations. The stock had hit a 52-week high on Feb 8.

While the company has taken advantage of a steady shift by advertisers to unconventional marketing methods, from Internet campaigns to special events and promotions, it has also looked to aggressively move into hot markets like India and China.

"We made more progress in the last two years than in the 15 years that proceeded," Omnicom Chief Executive John Wren said on a conference call, when asked about China. "I'm very bullish, given the position that we have, that we're going to move forward very, very fast."

He added: "Geographically, our No. 1 priority is still Asia."

The U.S., where money is increasingly shifting from traditional advertising to new media advertising, still accounted for about 52% of Omnicom's fourth-quarter revenue even though it grew at a slower pace.

Domestic revenue rose 7% to $1.69 billion, while international revenue rose 12.3% to $1.53 billion.

While Omnicom's earnings and revenue matched analysts' expectations, the company did suffer setbacks in 2006, notably the loss of the Wal-Mart Stores account.

But Wren said withdrawing from the final round of pitches for the world's largest retailer -- which had long been held by its GSD&M agency -- was a "sound business decision." He also said any recent account losses were not part of a broader issue at the company and had to be put in context.

"When you look at Omnicom and the size of Omnicom, these are not impactful to our ability to continue to deliver the numbers and I don't think they are reflective of a trend or of an issue," he said.

Overall, the company said its net new business activity totaled about $950 million in the fourth quarter.

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