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PR losses at Omnicom

Omnicom Group has reported that PR revenues dropped in the fourth quarter of 2008, coming in at $305m, more than 10 per cent lower than the same reporting period in 2007

Omnicom Group, whose public relations agencies include Fleishman-Hillard, Ketchum and Porter Novelli, has reported that PR revenues dropped in the fourth quarter of 2008, coming in at $305m, more than 10 per cent lower than the same reporting period in 2007.

The holding company also suffered in other areas, with overall worldwide revenue falling 7 per cent to $3.37bn from $3.63bn and domestic revenue down nearly 5 per cent to $1.76bn. Net income for the fourth quarter decreased nearly 14 per cent. PR represents approximately 9 per cent of Omnicom's business.

President and CEO John Wren said that the fourth quarter was the most challenging quarter for the company in 17 years. He attributed the troubles to the sudden decline in worldwide economic growth and the rapid strengthening of the US dollar.

Chief Financial Officer Randall Weisenburger said he considered the results to be "fairly strong given the economic environment". He added: "Qualitatively, we think our agencies are in very good shape… so while we can't expect our agencies to control the global economy, we do expect them to continue to outperform the economy overall and, more importantly, to outperform their peers."

Still, he acknowledged that almost all of the company's agencies lost revenue during the quarter, "mostly in project revenue, which is traditionally larger in the fourth quarter and for us heavily skews to the United States". Healthcare was among the areas he identified as being the most challenging "due to a lower number of new product releases and cuts in spending from the large pharma companies".

Wren said Omnicom's situation is not likely to improve in the very near term. "Looking forward, we think the first nine months of this year are going to be difficult. At this point we expect to see some improvement late in the year with easier fourth quarter comparisons and positive gains from significant stimulus programmes by the US and other countries."

Omnicom has already begun a cost-cutting initiative to offset the loss of revenues. During the fourth quarter, the company reduced the size of its staff at many agencies, eliminated a number of open positions, cut back on travel costs, froze or delayed salary increases, and reduced the size of bonuses for senior executives. "As we move through 2009 we will continue as necessary and if necessary to aggressively manage our costs to keep them in line with revenue forecasts," Weisenburger said.

12th February 2009

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