Omnicom warns strong US dollar will hit harder than expected

Omnicom said the strong US dollar would be a bigger drag on revenue this year than it had previously expected as the US advertising holding company reported its first drop in quarterly revenue in four years.

Foreign exchange rates will trim 6.5 per cent from sales this year if rates stay where they are, the company said on Tuesday, up from the 5 per cent impact it had forecast in February. Second-quarter revenue is expected to take a 7.5 per cent hit.

"While our underlying businesses continue to perform well, the negative impact of foreign exchange continues to create a considerable headwind on our revenue," said Philip Angelastro, chief financial officer.

In the first quarter, revenue fell 0.9 per cent to $3.47bn from $3.5bn a year ago, compared with Wall Street's expected $3.5bn.

John Wren, chief executive, said the company was on track to meet its full-year targets.

US sales, which make up 56 per cent of Omnicom's total, rose 4.6 per cent to $1.96bn, but international revenue fell 7.3 per cent to $1.51bn. The company said currency effects shaved 6.5 per cent from revenue, more than the 5.5 per cent it had expected.

But stripping out the impact of foreign exchange and acquisitions, organic revenue rose 5.1 per cent.

Net income rose 1.8 per cent to $209.1m, or 83 cents a share, from $205.5m, or 77 cents a share. Analysts had expected earnings of 82 cents a share.

On a conference call with analysts, Mr Wren said the advertising industry was undergoing a "major transformation as new digital tools and platforms emerge with media and technology evolving at an accelerating pace".

He cited the recent rush of media companies, pay-television providers and technology groups into internet video services, which is disrupting the traditional TV market and the $70bn US TV advertising industry.

With audiences fragmenting and viewership moving to digital devices, marketers and media groups are looking to bring the tools of digital media to personalise their TV campaigns for specific viewers. They are also turning to automated, or programmatic, technologies to target customers and buy advertising inventory, sometimes in real time.

Revenues from Omnicom's programmatic business rose 10 per cent from the fourth quarter of 2014 to the first quarter of this year.

"We're moving from marketing to broad audiences to marketing to people," Mr Wren said.

Omnicom shares fell 1.3 per cent to $76.85 in morning trading in New York.

Rival Publicis, whose $35bn "merger of equals" with Omnicom fell apart last year, reported first-quarter sales on Tuesday that came in above expectations.

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