Political headwinds mean Omnicom misses revenue forecasts

Omnicom’s fourth quarter revenues increased 2.1% year-over-year to hit $4.24bn but unforeseen political headwinds resulting in a stronger-than-expected US dollar meant it missed earlier forecasts, as its international business growth outpaced that in its domestic base. Management, howeever, remain pleased with its increasingly diversified revenue stream.

Omnicom's leadership has been quick to highlight the ongoing success of its data-led services including Accuen and Annalect

The results fell shy of earlier forecasts of a$4.26bn, with the New York-based network agency today (February 7) reporting that the “negative impact of foreign exchange” –ie the impact of political events such as Brexit leading to a strengthened US dollar –meant its like-for-like revenue haul had decreased 1.8%.

A statement on the company’s investor relations website explained how its global performance led to the overall decrease, as its growth in the UK and Eurozone outstripped that in the US.

“Across our regional markets, organic revenue growth … was 0.6% in North America, 8.5% in the United Kingdom, 6.2% in the Euro Markets … when compared to the same quarter of 2015,” it read.

Meanwhile, worldwide revenue for the 12 months, ended December 31, 2016, increased 1.9% to $15.42bn from $15.1bn in the same period of 2015.

During Omnicom’s subsequent earnings call, chief executive John Wren explained the the company expected the above dynamic to remain a concern in 2017, but further added how it intended to offset these concerns.

“In the face of numerous global, economic and political events in 2016 that affected an already tepid macroeconomic environment, we continue to address the things we can control," he said.

“Our management teams remain laser focused on attracting and retaining the best talent, quickly adapting to delivering services better and faster for our clients and managing our costs.”

Wren went on to highlight some of the agency’s highlights through out 2016 including prestige accounts wins such as AT&T, Delta Airlines, Volkswagen as well as the launch of its We Are Limited to service the McDonald’s account win; plus the continued growth of its data-led products business including Hearts and Minds, Annalect as well as its trading desk Accuen.

“Our major client wins and hundreds more smaller wins across our entire group are a testament to the success of our strategies. These wins share a common thread – our investments in our people and in our digital data and analytical capabilities, our ability to act in an agile fashion to meet our clients’ needs, which is grounded on a long established culture of creativity and collaboration that is the common DNA at Omnicom,” said Wren.

Under questioning from financial analysts listening in on the call, management further gave a breakdown of the contribution made by its various constituencies including how its trading desk Accuen contributed $86m more in 2016 compared to 12 months earlier.

Although, Wren did hasten to add: “But we wouldn’t be surprised if we continued to see reduction in the share of programmatic that’s executed on a bundled basis and growth in programmatic that’s executed on a traditional basis.”

This is widely expected to be as a result of increased advertiser vigilance over how their media investments are distributed between media agencies, adtech outfits and media owners (especially in the wake of the ANA report earlier in 2016), with analysts highlighting the recent cautionary messaging from Marc Pritchard the brand chief of Omnicom’s largest-spending client P&G.

“We have to be able to measure the effectiveness of the media and we have to be able to have a standardized, or get close to a standardized ad verification strategy to track and to measure, and to eventually value what we’re willing to pay for or what clients are willing to pay for,” said Wren adding that it is now working with Integral Ad Science in an attempt to assuage advertisers’ concerns.

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