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.
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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.

This story originally appears in strategy.