Earnings Roundup: Agencies optimistic despite parent co. results

NEW YORK: Earnings results from Omnicom and Publicis indicate that the recession continues to take a toll.

NEW YORK: Earnings results from Omnicom and Publicis indicate that the recession continues to take a toll on the holding companies that house a number of the global PR firms. Both companies reported declines in revenue and profit compared to last year.

Omnicom Group had an 18.5% decrease in its second quarter PR revenues, dropping to $271.7 million versus $322 million in Q2 2008. Year-to-date, PR revenue fell 18% to $531.8 million from $627.5 million year-over-year.

The last time Omnicom's PR revenues posted a year-over-year quarterly increase was in the second quarter of 2008. The last three quarters have resulted in year-over-year PR revenue declines.

Yet, the company's leadership remains optimistic.

“I believe that the top-line pressure has stabilized,” said John Wren, Omnicom president and CEO. “And while top-line growth will still take several quarters to achieve, we expect modest economic growth going into 2010 and new business activity will benefit the company.”

Deutsche Bank Equity Research analyst Matt Chesler, who follows Omnicom, was more cautious about the company's prospects in a report.

“We're not ready to ‘buy the recovery' just yet – the bottom is elusive, the recovery slope uncertain,” reads Chesler's report. “New biz and dispositions should start to contribute, but it is unlikely that 2Q reflected the full impact of the fee re-sets so we need more convincing that the worst is behind us.”

Omnicom's agencies include Fleishman-Hillard, Ketchum, Porter Novelli, Cone, Brodeur, and Kreab & Gavin Anderson, among others.

Year to date, Omnicom has earned about $398 million in net income on global revenues of $5.6 billion. That's a 15.8% year-over-year decrease in revenues, and a 23% decline in income.

During the earnings call, Omnicom EVP and CFO, Randall Weisenburger, attributed a great deal of the company's year-over-year declines to a few specialty areas: recruitment marketing, the auto sector (which was further disrupted by the Chrysler bankruptcy), events and sports marketing, and not-for-profit marketing.

According to Dave Senay, president and CEO of Fleishman-Hillard, the declines don't represent the state of things at that firm.

“We substantially outperformed the PR sector within the Omnicom reported earnings,” wrote Senay in an e-mail to PRWeek. “Our second quarter was better than our first, year over year. We expect continued improvement throughout the remainder of the year. We have 64 open positions for which we are actively recruiting.”

Ketchum also maintains that it had a good showing in the second quarter.

“Ketchum had a strong second quarter performance, with our first half slightly up over 2008 and an improvement in our results when you compare Q2 2009 to Q1 2009,” said Marv Gellman, Ketchum VP, director of media relations. “We believe this is due to our continued focus on four priorities, providing exceptional client service, a commitment to talent, a focus on new business, and closely managing our business. We're excited about the integration of our business with Pleon in Europe and the opportunities this presents to meet client demands and grow our business.”

At Publicis Groupe, net income for the first half of the year fell 13% to $237.3 million from $273.6 in the comparable 2008 period. However, the company said a nearly 6% growth in digital helped provide "a cushion against the overall market decline." Revenues dipped slightly to $3.1 billion, compared to $3.2 billion in the year ago period.

The Specialized Agencies and Marketing Services division (SAMS), which is in the process of being reorganized and houses the Groupe's PR entities including MS&L and Kekst & Co., as well as digital activities, contributed 42% of revenues; 37% came from advertising; and 21% stemmed from the media division.

Jim Tsokanos, North American president of Publicis' MS&L Worldwide, said the economic pressure is lifting a bit.

“This is still a tough environment, but things seem to be improving,” said Tsokanos. “I think our clients are feeling more confident than 6 months ago; we're starting to see things ramp up again.”

PRWeek UK reported that Publicis Groupe' recently appointed PR chief, Olivier Fleurot, will integrate MS&L and Publicis Consultants under his leadership. According to the story, Fleurot said he had no plans to appoint individual CEOs following the departures of MS&L's Mark Hass and Publicis Consultant's Eric Giuily.

“By integrating these agencies together, it will provide fantastic growth for the group, reach and scale for our clients, and it will provide growth opportunities for our employees,” Tsokanos added.

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