| OmnicomGroup |
| Merrill Lynch 2004 Advertising/Marketing, Education & Information Conference |
| March 2, 2004 |
Forward-Looking Statements |
| Certain of the statements in this document constitute forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks and other factors that may cause our actual or our industry’s results, levels of activity or achievement to be materially different from those expressed or implied by any forward-looking statements. These risks and uncertainties include, but are not limited to, our future financial condition and results of operations, changes in general economic conditions, competitive factors, changes in client communication requirements, the hiring and retention of human resources and our international operations, which are subject to the risks of currency fluctuations and exchange controls. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of those terms or other comparable terminology. These statements are only present expectations. Actual events or results may differ materially. |
| Other Information |
The historical financial information contained in this document has not been audited, although some of it has been derived from Omnicom’s historical financial statements, including its audited financial statements. In addition, industry and other non-financial data contained in this document has been derived from sources we believe to be reliable, but we have not independently verified such information, and we do not, nor does any other person, assume responsibility for the accuracy or completeness of that information. |
| The inclusion of information in this presentation does not mean that such information is material or that disclosure of such information is required. |
| OmnicomGroup | 1 |
| Who We Are |
| The World’s Leading Advertising and Marketing Communications Services Group |
| OmnicomGroup | 2 |
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| Traditional Media Advertising | Customer Relationship Management | Public Relations | Specialty Communications |
30 Advertising & Marketing Disciplines |
150+ Strategic Brand Platforms |
1500+ Individual Agencies |
| OmnicomGroup | 3 |
| Long-Term Trends Unchanged |
| Client-Specific Trends |
| • | Desire to manage brands on a pan-regional or global basis |
| • | Reduction in service partners |
| • | Greater coordination of advertising with other marketing initiatives |
| • | Renewed client M&A activity |
| Industry-Specific Trends |
| • | Industry consolidation |
| • | Creation of pan-regional and global Marketing Services Networks |
| • | Continued unbundling of media planning and buying from creative services |
| • | Media fragmentation and PVRs |
| OmnicomGroup | 4 |
| Factors Impacting 2004 |
| • | Clients shifting focus to top-line growth |
| • | Increase in new business activity |
| • | Increase in media spending - | US Elections Olympics European Football Championship |
| • | Corporate merger activity picking up |
| • | Economic climate improving |
| OmnicomGroup | 5 |
| Objectives |
| • | Continue to increase our investment in training and development of our people |
| • | Maintain the leadership positions of our brands |
| • | Achieve double digit Revenue and Net Income growth |
| • | Make selective accretive acquisitions that allow us to further extend our strategic advantages |
| • | Improve our operating margins |
| • | Increase the flexibility of our cost structure |
| • | Use free cashflow to enhance shareholder value |
| OmnicomGroup | 6 |
| Financial Review |
| OmnicomGroup | 7 |
| 2003 |
| Financial Results |
| OmnicomGroup | 8 |
| 2003 Performance |
| Full Year | |||||||
| 2003 | 2002 | % Change | |||||
| Revenue | $8,621.4 | $7,536.3 | 14.4 | % | |||
| Operating Income | 1,164.7 | 1,104.1 | 5.5 | % | |||
| % Margin | 13.5% | 14.7% | |||||
| Net Interest Expense | 42.8 | 30.5 | |||||
| Profit Before Tax | 1,121.9 | 1,073.6 | 4.5 | % | |||
| % Margin | 13.0% | 14.2% | |||||
| Taxes | 380.9 | 375.6 | |||||
| % Tax Rate | 34.0% | 35.0% | |||||
| Profit After Tax | 741.0 | 698.0 | 6.2 | % | |||
| Equity in Affiliates/ Min. Interest | (65.1 | ) | (54.5 | ) | |||
| Net Income | $ 675.9 | $ 643.5 | 5.0 | % | |||
| Earnings per Share | 3.59 | 3.44 | 4.4 | % | |||
| OmnicomGroup | 9 |
| 2003 Total Revenue Growth |
| Total Company | United States | International | |||||||||
$ | % | $ | % | $ | % | ||||||
Prior Period Revenue | $7,536.3 | $4,284.6 |
| $3,251.7 | |||||||
Foreign Exchange Impact(a) | 465.6 | 6.2% | — | — | 465.6 | 14.3% | |||||
Acquisition Revenue(b) | 271.7 | 3.6% | 174.7 | 4.1% | 97.0 | 3.0% | |||||
Organic Revenue(c) | 347.8 | 4.6% | 261.5 | 6.1% | 86.2 | 2.7% | |||||
Current Period Revenue | $8,621.4 | 14.4% | $4,720.9 | 10.2% | $3,900.5 | 20.0% | |||||
| (a) | To calculate the FX impact, we first convert the current period’s local currency revenue using the average exchange rates from the equivalent prior period to arrive at constant currency revenue. The FX impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency. |
| (b) | Acquisition revenue is the aggregate of the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period. |
| (c) | Organic revenue is calculated by subtracting both the acquisition revenue and the FX impact from total revenue growth. |
| OmnicomGroup | 10 |
| 2003 Revenue Mix |
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| Revenue Mix by Discipline – Full Year | ||||||
$ Mix | Growth | |||||
Advertising | 3,739.7 | 14.1% | ||||
CRM | 2,918.6 | 20.5% | ||||
PR | 955.1 | 3.7% | ||||
Specialty | 1,008.0 | 9.9% |
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| Revenue Mix by Geography – Full Year | ||||||
$ Mix | Growth | |||||
United States | 4,720.9 | 10.2% | ||||
Euro Markets | 1,789.9 | 22.6% | ||||
United Kingdom | 941.9 | 15.9% | ||||
Other | 1,168.7 | 19.4% |
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| OmnicomGroup | 11 |
| Historical Performance |
| OmnicomGroup | 12 |
| Financial Performance(a) |
| Revenue | Operating Income |
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| Net Income | Earnings Per Share |
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| (a) | 2001 results are adjusted to assume that the cessation of goodwill amortization occurred on January 1, 2001. |
| Note: “Growth” is the year-over-year growth from the prior period. |
| OmnicomGroup | 13 |
| Revenue |
 |
| Note: | “Growth” is the year-over year growth from the prior period. |
| OmnicomGroup | 14 |
| Operating Income |
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| Note: | 2001 results are adjusted to assume that the cessation of goodwill amortization occurred on January 1, 2001. “Growth” is the year-over year growth from the prior period. |
| OmnicomGroup | 15 |
| Net Income |
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| Note: | 2001 results are adjusted to assume that the cessation of goodwill amortization occurred on January 1, 2001. “Growth” is the year-over year growth from the prior period. |
| OmnicomGroup | 16 |
| Earnings Per Share |
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| Note: | 2001 results are adjusted to assume that the cessation of goodwill amortization occurred on January 1, 2001. “Growth” is the year-over year growth from the prior period. |
| OmnicomGroup | 17 |
| Long-Term Consistent Growth |
| By maintaining the exceptional balance and diversity of its portfolio of companies and clients, Omnicom has been able to achieve consistent top-line and bottom-line performance. |
| Compound Annual Growth | 1 YR | 3YR | 5YR | 7YR | 10YR | 15YR | |
| Revenue | 14.4% | 11.9% | 16.1% | 18.4% | 19.0% | 16.4% | |
| Operating Income | 5.5% | 9.9% | 15.8% | 19.9% | 21.3% | 19.1% | |
| Net Income | 5.0% | 15.8% | 18.9% | 21.2% | 23.0% | 20.9% | |
| Earnings Per Share | 4.4% | 14.5% | 16.4% | 18.1% | 18.5% | 15.9% | |
| Note: | In performing CAGR calculations above, 2001 results are adjusted to assume that the cessation of goodwill amortization occurred on January 1, 2001. |
| OmnicomGroup | 18 |
| Competitive Position Analysis |
| OmnicomGroup | 19 |
| 2003 Revenue Mix by Discipline |
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OMC | WPP | IPG* | PUB | ||||
| Trad. Media Advertising | $3,739.7 | $3,166.2 | $3,762.0 | $2,405.3 | |||
| Relative Size to OMC |
| 85% | 101% | 64% | |||
| Marketing | $4,881.7 | $2,398.8 | $2,116.5 | $1,967.9 | |||
| Relative Size to OMC | 49% | 43% | 40% | ||||
| Market Research | N/A | $1,150.8 | N/A | N/A | |||
| Total | $8,621.4 | $6,715.8 | $5,878.5 | $4,373.21 | |||
| Relative Size to OMC |
| 78% | 68% | 51% |
| Note: | Financial results for WPP shown in US$ using 2003 average daily exchange rate of $1.636 / 1 GBP. Financial results for Publicis shown in US$ using 2003 average daily exchange rate of $1.132 / 1 Euro. |
| * | IPG full year results are calculated using 9 mos. actual and YTD percentage breakdown by discipline applied to FY ‘03 First Call consensus estimate. |
| OmnicomGroup | 20 |
| 2003 Revenue Mix by Geography |
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OMC | WPP | IPG* | PUB | ||||
| U.S. | $4,720.9 | $2,745.7 | $3,363.9 | $1,966.4 | |||
| Relative Size to OMC | 58% | 71% | 42% | ||||
| Euro Markets | $1,789.9 | $1,765.5 | N/A | N/A | |||
| Relative Size to OMC | 99% | ||||||
| UK | $ 941.9 | $1,087.5 | N/A | N/A | |||
| Relative Size to OMC | 115% | ||||||
| Euro & UK | $2,731.8 | $2,853.0 | $1,650.0 | $1,746.6 | |||
| Relative Size to OMC | 104% | 60% | 64% | ||||
| Asia/Other | $1,168.7 | $1,117.1 | $864.6 | $660.2 | |||
| Relative Size to OMC | 96% | 74% | 56% | ||||
| Total | $8,621.4 | $6,715.8 | $5,878.5 | $4,373.2 | |||
| Relative Size to OMC | 78% | 68% | 51% |
| Note: | Financial results for WPP shown in US$ using 2003 average daily exchange rate of $1.636 / 1 GBP. Financial results for Publicis shown in US$ using 2003 average daily exchange rate of $1.132 / 1 Euro. |
| * | IPG full year results are calculated using 9 mos. actual and YTD percentage breakdown by geography applied to FY ‘03 First Call consensus estimate. |
| OmnicomGroup | 21 |
Omnicom Credit and Liquidity |
| OmnicomGroup | 22 |
| Debt Analysis |
| December 31, | ||||||
2003 | 2002 | |||||
Operating Income (EBIT) (a) | $1,165 | $1,104 | ||||
Net Interest Expense (a) | $ 42.8 | $ 30.5 | ||||
EBIT / Net Interest | 27.2 | x | 36.2 | x | ||
Total Debt / EBIT | 0.9 | x | 1.2 | x | ||
Bank Loans (Due Less Than 1 Year) | $ 42 | $ 50 | ||||
$835 Million Revolver Due 11/14/05 | — | — | ||||
CP issued under 364 Day Facility (b) | — | — | ||||
5.20% Euro Notes Due 6/24/05 (c) | 192 | 160 | ||||
$850 Million Convertible Notes Due 2/7/31 | 847 | 850 | ||||
$900 Million Convertible Notes Due 7/31/32 | 892 | 900 | ||||
$600 Million Convertible Notes Due 6/15/33 | 600 | — | ||||
Loan Notes and Sundry (various through 2012) | 18 | 71 | ||||
Total Debt | $2,591 | $2,031 | ||||
| Cash and Short Term Investments | 1,547 | 696 | ||||
Net Debt | $1,044 | $1,335 | ||||
| (a) | “Operating Income (EBIT)” and “Net Interest Expense” calculations shown are for the years ended as specified. Although our bank agreements reference EBITDA, we have used EBIT for this presentation because EBITDA is a non-GAAP measure. |
| (b) | The underlying $1.2 billion 364 Day Credit facility expires 11/12/04 plus one-year term out at Omnicom’s option. |
| (c) | The change in the outstanding balance is the result of changes in the Euro to U.S. dollar currency exchange rate. The Euro balance outstanding as of December 31, 2003 and 2002 was €152.4. |
| OmnicomGroup | 23 |
| Liquidity Analysis |
| Omnicom believes it has ample liquidity to meet all foreseeable business and capital requirements. |
As of December 31, 2003 | ||||||||
Total Amount | Outstanding | Available | ||||||
Committed Facilities | ||||||||
364 Day Revolving Credit Facility(a) | $1,200 | $ — | $1,200 | |||||
3 Year Revolving Credit Facility | 835 | — | 835 | |||||
Other Committed Credit Facilities | 42 | 42 | — | |||||
Total Committed Facilities | 2,077 | 42 | 2,035 | |||||
Uncommitted Facilities(b) | 391 | — | — | (b) | ||||
Total Credit Facilities | $2,468 | $ 42 | $2,035 | |||||
Cash & Short Term Investments | 1,547 | |||||||
Total Liquidity Available | $3,582 | |||||||
| (a) | The underlying $1.2 billion 364 Day Credit facility expires 11/12/04 plus one-year term out at Omnicom’s option. |
| (b) | Uncommitted facilities in the U.S., U.K. and Canada. These amounts are excluded for purposes of this analysis. |
| OmnicomGroup | 24 |
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