PUBGY Publicis Groupe SA (QX)

By Alexandra Bruell 

Omnicom Group Inc. continued to justify its decision to rent data services instead of making large acquisitions, a sign that the ad holding company will continue to swim against the tide of its competitors.

"We prefer to rent the right data and technology that can improve our agility and client integration at any point in time rather than investing in legacy data assets and platforms that can easily become obsolete," said Omnicom Chief Executive Officer John Wren during a second-quarter earnings call Wednesday.

Omnicom considered acquiring the two large data firms that were recently sold to ad-industry rivals, Mr. Wren acknowledged, but didn't see enough upside. Although he didn't name names, Mr. Wren likely was likely referring to Interpublic Group of Cos.' $2.3 billion acquisition of Acxiom Corp.'s Marketing Solutions business unit last summer and Publicis Groupe SA's $4.4 billion purchase of Epsilon this year.

Integrating such major acquisitions would create new challenges at a time when ad companies are coping with ambiguities around new data privacy rules in Europe and in the U.S., Mr. Wren said.

"There was no [return on investment] on the transactions for us," said Mr. Wren. "Our systems have always been open and unbiased and we think that's critical."

Omnicom owns large creative and media buying firms, including BBDO, DDB and OMD.

Mr. Wren also bashed consulting firms, which have been increasingly investing in ad services.

"They put in enterprise systems and do fancy things and pretend that they're in our business, but in fact they don't have any creative assets, " he said. "Creating a global network of creative assets is not a simple matter."

While macroeconomic uncertainty looms around the world, it is not currently having a serious impact on Omnicom's business, Mr. Wren said.

"We cannot predict what's going to happen with Brexit," he said. "The good news is we don't have a lot of financial services clients in the U.K. We don't know what's going to happen with tariffs and what the reactions are going to be. We remain cautious in trying to gain market share in all the places we operate in."

Omnicom reported a 3.6% decrease in revenue in the second quarter, to $3.7 billion. The revenue drop met analyst expectations.

The company attributes the dip to the effect of foreign exchange rates and spinoffs exceeded acquisitions over the past year.

Organic revenue, a key metric that strips out currency effects and acquisitions, increased 2.8% in the quarter compared with the same period last year. Organic revenue grew 3.2% in the U.S.

Earnings per share in the quarter rose to $1.68 from $1.60. Operating profit in the quarter decreased 1.5% to $574 million.

The revenue results are a slight improvement from the first quarter, when the company reported a 4.4% decrease in revenue and a 2.5% increase in organic revenue.

Omnicom shares were down 2.8% at $81.66 in late-morning trading.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

(END) Dow Jones Newswires

July 17, 2019 12:21 ET (16:21 GMT)

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