Company Overview
Company Overview Formed in 1986 78,500 employees 5000+ clients Biggest 100 clients provide 50% of revenue No client comprises more than 3% of revenue US comprises 56% of revenue Advertising 53% of revenue, CRM 31%, PR 9%, Specialty Communications 7%
Company Overview 2016 revenue $15.4bn, net profit $1.2bn Oligopoly of 6. Big players are WPP, Omnicom and Publicis. Secondary players are Interpublic, Havas and Denstu
Why Do Companies Need Advertising?
Why Advertising Agencies Will Endure Advertising is an industry of talent Advertising needs are diverse Ad buying offers a volume discount
Why is Advertising a Very Good Business To Be In?
Characteristics of Advertising Industry Loyal customers Competition is rarely price-based Customers pay before work is done Cyclical Staff share in success and failure
How financially stable is the company?
10 year financial profit margins
What’s Management Like?
Management CEO John Wren CEO for 20 years, with the company for 28 years Last year’s pay c. $20m Owns $80m in Omnicom stock Martin Sorrel pay £48m (cut from £70m)
How Does Omnicom Use Its Profits?
Capital Allocation Doesn’t make large acquisitions 2016 use of cash: 10% capital expenditures, 32% dividends, 27% acquisitions, 30% buybacks $234m stock buyback in first 3 months of 2017
Risks
Risks Not enough invested in digital Will digital erode volume advantage? Has Amazon changed advertising? CEO is 67
Opportunities
Opportunities Cyclical low on advertising spending Tax rate reductions
Stock Price History
Valuation $18.8bn market capitalization $22.2bn enterprise value $1.25bn consolidated income 17.7x Profit to Enterprise Value 10%+ return predicted