Omnicom results reveal it cut over 6,000 staff in Q2 as profit tumbled almost 90%

The holding group of agencies including DDB, TBWA, OMD and PHD has revealed its operating profit has tumbled 89.1% for the second quarter of 2020, while net profit is down 106.5%.

Omnicom’s financial results also revealed the group had cut over 6,000 staff in the three months to 30 June, 2020.

The group said it expected this to be a low-point in its economic performance, however anticipated there is still more pain to come.


Omnicom has been hit by the economic downturn

“We expect that the negative impact from the pandemic on our revenue will continue for the remainder of the year, and such reduction in revenue could adversely impact our ongoing results of operations and financial position. These effects could be material. While we believe that our performance in the second quarter of 2020 was the low point for the year, we expect that our results of operations for the second half of the year will continue to be lower than the prior year period; our revenue and margins are expected to improve compared to the second quarter of 2020,” its financial report said.

Omnicom’s financial performance (Click to enlarge)

Revenue for the second quarter of the calendar year fell 24.7% from US$3.72bn to US$2.80bn. Factoring in the earlier Q1, the decline was less dramatic, down 13.6% from US$7.19bn to US$6.20bn.

In the Asia Pacific Region, revenue was US$319.8m for the quarter, a decline of 27.5% from Q2 last year, while half-year revenue was US$679.1m, down 12.2%.

Revenue by region (Click to enlarge)

While some clients have fared better than others throughout the pandemic, Omnicom conceded no organisation is completely immune.

“Global economic conditions are volatile and economic uncertainty cuts across all clients, industries and geographies. Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to continue to be adversely affected as marketers reduce expenditures in the short term due to the uncertain impact of the pandemic on the global economy. Over the second half of 2020, we expect the global economic performance and our performance to vary by geography depending on how effectively governments respond to the COVID-19 pandemic and, in turn, allow for the reopening of their economies,” the report said.

Salary and service costs fell due to the headcount reduction. For the year to 30 June, 2020, salary and service costs were down 23.8% to US$2.03bn. For the half year, the decline was 12.7% to US$4.56bn.

Operating profit was way down for both the quarter and the half year. For Q2, it was US$62.5m, a decline of 89.1% from Q2 2019’s US$573.7m. For the year to June 30, 2020, it was down a slightly less dramatic 51.9% from US$1bn to US$482.7m.

The group’s net profit for the quarter last year was US$370.7m, down to a net loss of US$24.2m this year, a decline of 106.5%. For the half year, the profit slid from US$633.9m in 2019 to US$234m in 2020 – a 63% decline.

The group’s biggest revenue driver was still the advertising segment. For the quarter, advertising brought in US$1.5bn, down 28.7%. For the half year, advertising accounted for US$3.392bn, down 15.9%.

Revenue by segment (Click to enlarge)

Customer experience was the second-largest revenue driver, accounting for US$488.7m in revenue for the quarter, down 26.7%. For the half year, it brought in US$1.06bn, down 15.2%.

Revenue from public relations was US$295.8m for the quarter and US$627.5m for the first half, declines of 15.3% and 8.2% respectively.

Healthcare grew slightly from US$291m in Q2 2019 to US$298.9m, an increase of 2.7%. For the half year it was up 5.7% to US$580.2m.

The group noted that prior to the pandemic, there were some positive trends emerging in the industry.

“These trends include clients increasingly expanding the focus of their brand strategies from national markets to pan-regional and global markets and integrating traditional and non-traditional marketing channels, as well as utilising new communications technologies and emerging digital platforms. As clients increase their demands for marketing effectiveness and efficiency, they have made it a practice to consolidate their business within one service provider in the pursuit of a single engagement covering all consumer touch points. We have structured our business around these trends. We believe that our key client matrix organisation structure approach to collaboration and integration of our services and solutions has provided a competitive advantage to our business in the past and we expect this to continue beyond the current COVID-19 pandemic over the medium and long term,” it said.

The company’s long-term debt for the half-year is US$5.71bn, up from US$4.5bn (a 26% increase). Short term-debt is US$6.4m.


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