Omnicom’s revenue tumbles in Q2

The holding co. has cut more than 6,100 workers and a million square feet of real estate to reduce costs.
johnwren

Omnicom’s second quarter for 2020 took place within the grips of the pandemic, and the results were predictably bleak.

Second quarter revenue dropped from US$3.7 billion to US$2.8 billion year-over-year, a drop of 24.7%. When the impact of exchange rates and acquisition activity is excluded, the decrease is only slightly softened to 23%. For the year-to-date, organic revenue at the holding company is down 11.7% compared to this point in 2019.

The impact of the COVID-19 pandemic was felt across Omnicom’s disciplines and regions.

Organic growth in its advertising divisions decreased 26.6%, with the CRM Consumer Experience division decreasing 25.6% and CRM Execution and Support decreasing 27.6%. Organic growth in PR decreased by a relatively less staggering 13.9%, while healthcare increased slightly by 3.2%.

Omnicom’s “Other North America” region – which includes operations in Canada – saw organic revenue fall 29.6%. In the U.S., its biggest market, organic revenue fell 20.7%. Organic revenue decreased in the United Kingdom (by 23.7%), the rest of Europe (29.4%), Asia Pacific (18.6%), Latin America (24.1%) and the Middle East and Africa (39.4%).

Expectations are not high for the major holding companies’ Q2 results, the first quarter fully inclusive of the COVID-19 pandemic. Last week, Publicis Groupe reported a 13% dip in organic revenue, which beat analyst predictions.

Omnicom says it expects the impacts of the pandemic to be felt through the rest of the year, which could “adversely impact [its] ongoing results of operations and financial position and the effects could be material.”

Clients in travel, entertainment, energy, non-essential retail and automotive were the hardest hit and many have had to postpone or reduce marketing spend. However, Omnicom expects its services to be less in demand across categories – even among those that have fared well, such as healthcare, technology, telecommunications, financial services and consumer products, as marketers cut short-term costs due to ongoing financial and economic uncertainty. For example, revenue from travel and entertainment clients dropped 46.5% year-over-year and retail dropped by 27%, but food and beverage revenue dropped by 26.3%, consumer products by 27.3% and automotive by 29%.

During the second quarter, Omnicom realigned its agencies’ cost structures, which included severances and furloughs to reduce its workforce, reductions on real estate costs and taking a net loss on the disposing of certain smaller businesses and subsidiaries. Year-over-year, Q2 salaries and related costs were reduced by $235.5 million, vendor costs and discretionary expenses were reduced by $398.6 million and costs related to occupancy were down by $25.4 million. During a call with investors, CEO John Wren said it cut 6,100 workers and over a million square feet of space.