Omnicom Q2 Results Strong Though Unaccompanied By A Guidance Increase

Profile: Baa1/BBB+ EUR Spreads Muted

• Strong top line performance offset by an Op Profit miss though this was largely driven by efficiency initiatives. H1 credit metrics slightly worse though this is explainable by the Flywheel acquisition. Market likely to find the lack of a guidance upgrade disappointing though management left the window open for a later increase during the call.
  
  
• Q2 revenue + 6.8% YoY (+0.9% vs. BBG consensus) with organic growth of 5.2% (vs. 4.5% consensus) and a negative FX impact of 1%. Org growth was driven by Ads & Media +7.8% (roughly half the business) but weighed upon slightly by the next three largest segments at 1-2% which account for ~10% of the business each (Health, PR, and Precision Marketing which includes the new Flywheel acquisition).
• Op Profit was -7.3% (-11% vs. consensus) with a margin decrease to 13.2% from 15.3% in Q223; result here largely impacted by severance costs related to efficiency initiatives and a centralised production strategy.
• H1 top-line FCF (OCF excl. changes in op capital) was USD 0.9bn, in line with H123 though net FCF (post payouts and acquisition payments) was USD -550mn from USD -40mn driven by the Flywheel acquisition. Net EBITDA leverage 0.2x higher from Q1 at 1.5x.
• FY guidance left unchanged which the market may be disappointed with; from the call: “We're very comfortable with the forecast that we've given you. We're just slightly below the top-end having completed six months. And when we get evidence that the fourth-quarter post-election is going to be a stable period of time, we may elect at that point to review what guidance we've given you, but it's not our habit to be that flighty”.