Omnicom went through a brutal process to decide which assets were ditched following the takeover of IPG.
In a briefing on March quarter results, Citi Group analyst Jason Bazinet asked Omnicom how the company decided which assets were to be sold.
Omnicom posted organic revenue growth of 3.9% to $US5.6 billion for its core business in the March quarter. The growth number was calculated without those parts of the business that are marked for sale.
CEO John Wren said an initial list of the companies to hold for resale was based upon poor margin performance and unreliable growth.
“Then after it went through that filter, the second filter, which was the governing filter, was: is this necessary for our clients? Is this what our clients are asking for?” he said.
The final list was for a group of assets with combined annual revenue of $3.2 billion.
None of those identified for disposal are large. Wren said there are a lot of units spread throughout the world.
“We’re working to dispose of them,” Wren said.
“If there was another way to get them out of our financial statements, we would.”
The profit margins of these businesses are probably less than 10%.
Wren said Omnicom in the March quarter disposed of assets representing $US1 billion in revenue and not $1 billion in proceeds from sales.
The actual cash proceeds figure is $152.5 million, according to financial statements lodged with the March results. Omnicom hasn’t put a full year forecast on that.
The full list of those disposals isn’t known. However, the sale of an experiential business Jack Morton was closed in February.
Wren can’t wait to get rid of them, saying he has a team of accountants running around on the sales.
“I’d love to see these things off of my P&L and not talk about them anymore, but that’s not going to make me give them away either,” he said.
“We’re pretty confident that over the next several quarters, we can get through to most of them. We have teams doing this and outsiders.
“We’re focused on new business and growing our business and getting the teams that we brought together functioning in a proper way. That’s why we even call them core assets. That’s where most of our focus is.”
The takeover of IPG, which was finalised in November last year, created the world’s biggest global advertising group with 100,000 people and expected full year revenue of $US25.6 billion.
In the process, thousands of jobs have been lost as the most senior executives share a reported $US80 million bonus, including $US49 million to former IPG chief executive Philippe Krakowsky.
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