Omnicom Group (OMC) reported weak financial results for the second quarter of 2009 with earnings of 75 cents per share above the Zacks Consensus Estimate, but down 21% year-over-year.
Organic revenues declined 10.8%, net of a 0.2% impact of acquisitions and a negative currency impact of 6.8%. The strong dollar was a significant headwind during the quarter. Domestic revenue decreased 12.9% to $1.52 billion while international revenue decreased 22.0% to $1.35 billion.
The 10.8% decline in organic growth was primarily on the account of the automotive sector. Automotive was impacted by the Chrysler bankruptcy as well as declines in overall automotive client spending. Additionally, several specialty businesses and areas continued to decline. The recruitment business continued to post declines during the quarter.
Revenue by discipline declined in all categories: Advertising declined by 15.5%, CRM (Customer Relationship Management) by 18.7%, PR (Public Relations) by 18.5%, and Specialty Communications by 20.1%. Specialty Communications (mostly Yellow Pages) is a business in secular decline. The company’s most economically sensitive business line, Recruitment Advertising, was also very weak.
During the quarter, the company completed three comparatively small acquisitions. It acquired a research agency in China, a media agency that will add to the global network of PHD in Australia. The company also acquired a full-service agency in South Africa which has been the longstanding associate agency of the DDB in the market. Omnicom also completed the divestiture of the yellow pages or directory business, during the quarter.
Net interest expense for the quarter was $21.9 million, up 17.1% year-over-year and up about a $0.5 million sequentially. The increase was primarily the result of supplemental interest payments on the 2,032 notes in July 2008 and a decrease in the interest earned on the foreign cash balances along with the negative currency impact on those earnings.
Capital expenditures during the quarter were $40.0 million, down 20.8% from $50.5 million in the second quarter of 2007. Total acquisition expenditures were $58 million.
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