Omnicom Group Inc, (OMC)

Q2 2010 Earnings Call

July 20, 2010 8:30 am ET


John D. Wren - President and Chief Executive Officer Randall J. Weisenburger - Executive Vice President and Chief Financial Officer


Brian Shipman - Jefferies & Company William Bird - Bank of America Merrill Lynch Meggan Friedman - William Blair & Company Monica DiCenso - JP Morgan Tim Nollen - Macquarie James Dix - Wedbush Equity Research Benjamin Swinburne - Morgan Stanley Craig Huber - Access 342



Good morning ladies and gentlemen and welcome to the Omnicom Second Quarter 2010 Earnings Release Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions). As a reminder this conference call is being recorded.

At this time I would now like to introduce you to today’s conference call host Executive Vice-President, Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger, please go ahead.

Randall J. Weisenburger

Thank you, good morning and thank you all for taking the time to listen to our second quarter 2010 Earnings Call. We hope everyone has had a chance to review our earnings release. We’ve posted to our website both the press release and a presentation covering the information that we are going to present this morning. This call is also being simulcast and will be archived on our website.

Before we start, I’ve been asked to remind everyone to read the forward looking statements and other information that’s included on page one of the Investor Presentation and to point out that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations and actual events and results may differ materially.

We are going to begin the call with some brief remarks from John Wren, following John’s remarks we’ll review the financial performance for the quarter and then, both John and I will be happy to take questions.

John D. Wren

Good morning, thanks Randy. We are pleased to announce strong quarterly results for the second quarter. Results showed an improvement over the last year and overt the prior quarter. Overall these results demonstrate continued improvement in our business.

There are several key trends that I’d like to highlight. First, from an overall point of view economic growth is improving although slowly. Second, an increasing number of our clients are now focused on growth and we are starting to see increases in the scope of services they require.

Third, driven by the need for disciplined innovation during the recession our agencies are extremely well positioned to compete and win. Driving both industry recognition importantly some significant in business wins.

On the economy the picture is generally improving with the exception of several smaller European countries that have been at the center of the recent crisis. We continue to see evidence of recovery in the US and saw fairly strong revenue growth during the last quarter. As a result we are optimistic about the next few quarters, but we still remain cautious until the unemployment picture here markedly starts to improve.

Regarding Asia and Latin America growth in these markets continue to be strong with a positive outlook in the next several quarters.

Go back to Europe the picture is decidedly mixed, there are clearly some markets that have been and will continue to be affected by the current debt crisis and then other markets such as the UK, France and even Germany we are hopeful that we are at the bottom or near the bottom of any economic impasse.

Let me take a second and touch on what we are hearing from clients. In one of the more positive outcomes of the recession I believe that many of our client relationships are getting stronger. Last year when clients hit difficult times we reduced the scope of our work. As the focus now returns to growth many of our largest clients are bringing us in closer that they ever had into their strategic decision making process so we can help derive their results.

While I won’t get into specific clients or industries generally speaking the shift that’s occurring is very positive. Once again last year the focus was survival, today its growth and that growth should drive new and expanded engagements across all of our networks.

The third trend I mentioned is our internal performance, costs. As we talked over the past few quarters, our agencies were quick where they could when we hit the financial crisis. Now the challenge is to manage cost very thoughtfully as we start to reinvest in the growth of our business.

From a margin point of view and Randy will cover this a little bit more, some of the transition costs, fixed debt costs, severance and real estate reductions are still running through our system, but as we forecasted earlier this year those costs had a minor impact on our margins in this quarter. And at this point unless there is a double-dip recession we are near the end of the process and we expect to see margins level off in the second half and then start to improve next year.

On the revenue side we continue to see growth by discipline and geography and saw robust growth in our new business during the quarter, which should help drive our revenue in future quarters.

From a discipline point of view our specialty businesses with the exception of recruitment and advertising generated double-digit growth in the quarter and as we discussed these businesses were particularly -- they were hit particularly hard last year, but at this point aided by some easier year-over-year comps, we expect these business will continue to grow.

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