Omnicom sees light at the end of the tunnel for second quarter
There’s a glimmer of light at the end of the tunnel for the agency business—and it could start to be seen in the second quarter.
That’s one big takeaway from Omnicom Group’s earnings today that showed the continuing impact of the pandemic on its business. The company reported a 9.3% falloff in worldwide revenue in the fourth quarter of last year to $3.76 billion, and an 11.9% drop for the full year to $13.2 billion, compared to 2019.
Organic growth for the quarter fell 9.4% in the U.S., the sharpest drop excluding the U.K., which was down 12.4%, and the Middle East and Africa, which plunged 36.8%. For the full year, organic growth slid 10% in the U.S.
But while the first quarter was far from rosy, Omnicom CEO John Wren predicted a second-quarter rebound in a call with analysts: “We fully expect to return to positive organic growth in the second quarter and the balance of the year.”
Hardest hit among Omnicom’s disciplines for organic growth in the quarter was consumer experience, which decreased 15.8%, attributed by the company to a dearth of events due to COVID. Events, said Phil Angelastro, exec VP and chief financial officer, account for 3.5% to 4% of Omnicom’s total business.
Among its other areas of practice, customer relationship management execution and support was down 13.7%; PR, buoyed by the election, was up marginally at 0.2%; while health care—generally an area of growth for rivals—fell 2%. Advertising, which was down 9.7%, clocked in with a better number for the quarter than the full year, when it dropped 12.2%.
Omnicom attributed the health care numbers to a tough comparison to the prior year. For the full year, the holding company’s health care business grew 3.3%.
Media prospects seem positive and improved sequentially over the last three quarters, said Angelastro. “We are optimistic,” he said. “We own more than our fair share of pitches.” Specifically cited in the call was OMG’s recent win of Home Depot’s media business, along with Sanofi’s global media account.
Wren said that while clients are still committing to shorter time frames for media buys due to the pandemic, Omnicom’s media business should improve.
Among its client sectors, Wren said those in travel and entertainment and oil and gas showed the biggest slowdowns, while food and beverage, pharma and tech were stronger—or, as the company put it, “lower than the prior year but better than the second quarter.”
Angelastro said that organic revenue growth in the quarter, while down, was actually showing an improvement, compared to a 23% plunge in the second quarter and an 11.3% falloff in the third quarter of 2020.
Salary and service costs declined by $163 million in the quarter due to pandemic-induced reductions and government offsets as well as the impact of employees working from home.
Wren said the company has also “doubled its DE&I leads since last summer” and that all practice leaders at the holding company now have a DE&I leader.
Unmentioned in the call was the cyber attack that hit the holding company's Omnicom Media Group last week.