Omnicom Expands Margins as Organic Growth Accelerates
Core adjusted EBITA margin widened 1.9 percentage points to 17.8%.
Omnicom Group (OMC), the advertising and marketing-services company, posted a 63.4% increase in second-quarter revenue as the IPG acquisition enlarged the business.
The underlying operations also gained pace. Core-operations revenue rose 7.2% to $6.0 billion, including organic growth of 6.1%, up from 3.9% in the prior quarter, and a 1.1% benefit from foreign exchange. Core revenue increased 6.8% sequentially.
Reported revenue reached $6.563 billion, up from $4.016 billion a year earlier. Diluted earnings rose to $2.08 a share from $1.31, while adjusted earnings increased 29.3% to $2.65 a share. Both measures also advanced from the first quarter.
Profit growth outpaced the core revenue increase as cost-reduction synergies took hold. Core adjusted EBITA rose $181.4 million to $1.069 billion, while its margin expanded from 15.9% a year earlier. Compared with the first quarter, core adjusted EBITA climbed 28.2% and the margin widened three percentage points.
Integrated Media accounted for 52.5% of core revenue, up from 51.5% in the first quarter, while Experiential & Other increased its share to 11.2%. Advertising’s share declined to 15.7%, and Health and Public Relations also edged lower. The revenue mix became less concentrated in the U.S. as Europe, the U.K. and Latin America gained share.
The acquisition also raised financing and share-count burdens. Net interest expense increased $52.6 million to $93.3 million, primarily because of IPG debt and first-quarter refinancing, while the diluted share count rose 43.4% following the shares issued for the transaction. A lower effective tax rate partly offset those pressures.
Integration and transaction costs together with severance and repositioning expenses fell to $87.1 million from $154.8 million a year earlier. After the fourth quarter included $1.1 billion of repositioning costs and a $543.4 million loss on planned dispositions, the second quarter carried $47.0 million of repositioning costs and no quarterly disposition loss.