Omnicom Q1 sees revenue dip, but organic growth up 11.9%

Omnicom Group Inc. (OMC) has today reported a decrease in global revenue in the first quarter of 2022, with a 0.5% drop on the prior corresponding reporting period to $US3.41 billion ($AU4.611 billion), while in APAC there was positive organic growth.

Omnicom reported net income of $US173.8 million ($AU235.01 million) in its first quarter. On a per-share basis, the New York-based company said it had net income of US83c ($AU1.12). Earnings, adjusted for non-recurring costs, came to $US1.39 ($AU1.88) per share.

Operating profit fell to $US353 million ($AU477 million) compared to $US465.4 million ($AU629.31 million) during Q1 of 2021. Meanwhile, Omnicom’s operating margin for Q1 2021 dropped to 10.4%, compared to a 13.6% bump for the prior corresponding reporting period.

The 0.5% revenue drop was believed to be due to charges associated with the war in Ukraine and the decision to cease all operations in Russia earlier this year. Its portfolio includes agencies like BBDO Worldwide, TBWA Worldwide, DDB Worldwide, and Omnicom Media Group. The company filed its first-quarter results only through the end of February, which include its Russian business.


Further components of the change in revenue included a decrease in revenue from the negative impact of foreign currency translation of 2.5%, a decrease in acquisition revenue, net of disposition revenue, of 9.9% principally in the Advertising & Media discipline in the US, and an increase in revenue from organic growth of 11.9%.

On a conference call with investors, Omnicom Group CEO John Wren acknowledged the ongoing conflict.

“Our focus remains the safety and wellbeing of our Ukrainian colleagues and their families,” Wren said.

Despite the company’s focus on humanitarian aid, he emphasised the company’s “assistance to its employees in the region” will continue.

Despite a decline in revenue, Omnicom’s financial results were good – the company reported 11.9% organic revenue growth overall and expects to continue strong performance throughout the year.

“Overall, we’re very pleased with our quarterly results,” said Wren.

Strong year-over-year organic growth was seen across all regions. In North America, the US saw a 10.6% lift, while the rest of the continent grew 9.6%. Latin America was up 9.3%. In the UK, organic growth was up 10.3%. The rest of Europe witnessed a 13.8% spike, while Asia Pacific saw an 11.1% lift. Finally, the Middle East and Africa saw the largest marginal increase, with a 63.8% surge.

Organic growth in the first quarter of 2022 compared to the first quarter of 2021 increased across all of its fundamental disciplines, including: 9.1% for Advertising & Media, 20.3% for Precision Marketing, 13.8% for Commerce & Brand Consulting, 68.0% for Experiential, 6.3% for Execution & Support, 14.0% for Public Relations and 7.7% for Healthcare.

EBITA in the first quarter of this year dropped $112.9 million ($AU152.66 million), or 23.3%, to $372.4 million ($AU503.56 million) compared to the first quarter of 2021. The company’s EBITA margin of 10.9% dropped from 14.2%. Again, OMG credits charges surrounding the Russia-Ukraine conflict for the decline in performance. Excluding these charges, the company’s adjusted EBITA of $485.8 million ($AU656.90 million) increased 0.1%. The adjusted EBITA margin came to 14.2%.

“Our cash flow and balance sheet remain very strong and support our primary uses of cash, dividends, acquisitions and share repurchases,” said Wren in today’s call.

“We continue to plan cautiously for the remainder of the year, given the ongoing war in the Ukraine, the effects of the pandemic across markets, the continuing disruption of global supply chains and the economic risks posed by higher inflation and oil prices. With that said, given our strong performance in the first quarter, we are increasing our forecast for organic growth to between 6% and 6.5% for the full year 2022.”

“I’m confident we’ll continue to operate at a high level through this business cycle, as our agencies remain an integral partner in growing our clients’ businesses,” Wren said.

Omnicom Group currently trades at US$80.82 (A$109.28) as of 20 April 2022, and has a market capitalisation of US$16.73 billion (A$22.62 billion). 


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