01—Abstract
Summary
Summary of the 10-K filed February 9, 2017. Cited figures are marked; the original filing is the authoritative source.
Omnicom Group Inc. (OMC) reported 2016 revenue of $15,416.9 milliona, up $282.5 million, or 1.9%, from $15,134.4 million in 2015.
Foreign exchange reduced revenue by $283.8 millionb (1.9%), acquisitions net of dispositions added $38.2 million (0.3%), and organic growth added $528.1 million (3.5%). Operating profit rose to $2,008.9 million from $1,920.1 million, and operating margin improved to 13.0% from 12.7%. Net income attributable to Omnicom Group Inc. increased $54.7 million, or 5.0%, to $1,148.6 million, and diluted net income per share rose to $4.78 from $4.41.
By discipline, advertising grew 4.7% to $8,194.5 millionc and public relations grew 3.4%, while CRM declined 3.6% to $4,738.3 million. Management expects 2017 revenue to increase modestly, in excess of weighted average nominal GDP growth in its major markets, excluding currency effects, and expects currency changes to reduce 2017 revenue by approximately 1.25% at February 6, 2017 exchange rates. Total debt was $4,949.3 million against cash and short-term investments of $3,022.8 million, leaving net debt of $1,926.5 million.
The Credit Facility covenants were met, with a Leverage Ratio of 2.2 times and an Interest Coverage Ratio of 11.0 times. The company disclosed that two subsidiaries received Department of Justice Antitrust Division subpoenas on December 14, 2016 regarding an investigation of video production and post-production practices.
Omnicom stated it is fully cooperating and does not currently believe the investigation will have a material adverse effect on results or financial position. The company also retired 100 million treasury shares in December 2016 and repurchased $602.2 milliond of common stock during 2016.
02—Key points
Key Highlights
- Revenue rose 1.9% to $15,416.9 million, with organic growth of 3.5% offsetting a 1.9% negative foreign exchange impact.
- Operating margin increased to 13.0% from 12.7%, and EBITA margin increased to 13.8% from 13.4%.
- Diluted net income per share was $4.78, up from $4.41, with net income attributable to Omnicom Group Inc. of $1,148.6 million.
- Advertising revenue grew 4.7% to $8,194.5 million (53.2% of revenue), while CRM declined 3.6% to $4,738.3 million.
- Largest client represented 3.0% of 2016 revenue, and the 100 largest clients represented approximately 52%.
- Total debt rose to $4,949.3 million after issuing $1.4 billion of 3.60% Senior Notes due 2026, and the debt mix shifted to approximately 75% fixed rate and 25% floating rate.
- Management expects 2017 revenue to increase modestly, in excess of weighted average nominal GDP growth in major markets, excluding currency effects.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Omnicom Group kept $0.07.
- Revenue$15.42B100.0%
- Cost of revenue−$12.65B82.1%
- Gross profit$2.77B17.9%
- Operating costs−$736.8M4.8%
- Operating income$2.03B13.2%
- Interest, other & tax−$881.9M5.7%
- Net income$1.15B7.5%
Where FY2016 revenue went
$15.42B- Cost of revenue: $12.65B, 82% of revenue
- Net income: $1.15B, 7.5% of revenue
- SG&A: $443.9M, 2.9% of revenue
- Other operating costs: $292.9M, 1.9% of revenue
- Interest, other & tax: $881.9M, 5.7% of revenue
Kept 7.5% as net incomeNet income $1.15B · 7.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 9, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $15.42B$15.13B | +1.9% |
| Cost of Revenue | $12.65B— | — |
| Gross Profit | $2.77B— | — |
| SG&A Expenses | $443.90M$431.80M | +2.8% |
| Operating Expenses | $13.39B$13.21B | +1.3% |
| Operating Income | $2.03B$1.92B | +5.7% |
| Interest Expense | $231.30M$181.10M | +27.7% |
| Net Income | $1.15B$1.09B | +5.0% |
| EPS (Basic) | $4.80$4.43 | +8.4% |
| EPS (Diluted) | $4.78$4.41 | +8.4% |
| Shares Outstanding (Basic) | 237.90M244.20M | −2.6% |
| Shares Outstanding (Diluted) | 239.20M245.20M | −2.4% |
05—Questions
Frequently Asked Questions
How did Omnicom's revenue and profitability change in 2016?
Revenue increased $282.5 million, or 1.9%, to $15,416.9 million. Operating profit increased to $2,008.9 million from $1,920.1 million, and operating margin rose to 13.0% from 12.7%. Net income attributable to Omnicom Group Inc. increased $54.7 million, or 5.0%, to $1,148.6 million.
What is the impact of foreign exchange on Omnicom's results?
Changes in foreign exchange rates reduced 2016 revenue by $283.8 million, or 1.9%. The filing notes that the British Pound weakened substantially against the U.S. Dollar. The company expects currency changes to reduce 2017 revenue by approximately 1.25% at February 6, 2017 exchange rates.
What is Omnicom's debt and liquidity position?
At December 31, 2016, total debt was $4,949.3 million and cash and short-term investments were $3,022.8 million, for net debt of $1,926.5 million. The company had a $2.5 billion Credit Facility expiring July 31, 2021 and the ability to issue up to $2 billion of commercial paper. Its Leverage Ratio was 2.2 times against a 3 times covenant limit, and its Interest Coverage Ratio was 11.0 times against a 5 times minimum.
Is Omnicom facing any material legal or regulatory issues?
On December 14, 2016, two subsidiaries received subpoenas from the U.S. Department of Justice Antitrust Division concerning its investigation of video production and post-production practices in the advertising industry. Omnicom is fully cooperating and does not currently believe the investigation will have a material adverse effect on its results or financial position, though the ultimate resolution could differ materially.
What does Omnicom expect for 2017?
Barring unforeseen events and excluding currency effects, Omnicom expects 2017 revenue to increase modestly, in excess of weighted average nominal GDP growth in its major markets. It also plans to continue pursuing acquisitions and evaluating its portfolio for non-strategic or underperforming businesses to dispose of.
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