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Omnicom organic growth dips 12% annually as it faces off 2021 ‘challenges’

Omnicom has weathered another decline in organic growth over the fourth quarter

Omnicom has weathered another decline in organic growth over the fourth quarter, falling 9.6% to $3.7bn, a modest improvement on the 11.7% fall reported in the third quarter.

Across the full year, organic growth slipped 11.1% to $13.2 billion, once again entering double-digit territory. The Drum digests the downward data.

A ‘challenging’ year ahead

  • Attributing much of the slump to the drag effect of Covid, Omnicom endured a disastrous double-digit 11.9% decline in global revenues to $13.1bn in 2020 – way off the equivalent $14.9bn generated in 2019.

  • Global advertising revenues fell by 9.7% in the fourth quarter and 12.2% for 2020 as a whole as lockdown measures conspired to hammer consumer and business confidence.

  • Media showed signs of quarter-on-quarter improvements however as the situation has slowly stabilised while health and pharma, food and beverage and technology clients have all kept the spending taps turned on.

  • Unsurprisingly the same cannot be said for the moribund travel, entertainment or oil and gas sectors.

  • Chief executive officer John Wren said: “Although we see hope as the vaccine rolls out, we know there are still significant challenges that will impact 2021. In evaluating 2021, the first quarter has difficult comps.“

  • The negative impact of Covid did not make its presence felt until the second quarter of 2020. Wren said: “Looking beyond the first quarter, our current expectations for the balance of the year is that we will achieve positive organic growth.“

  • Looking ahead Wren concludes: “Our agency leaders have done an excellent job of managing our cost base to be aligned with revenues and that the work continues into 2021. At the same time, we remain laser-focused on driving our strategic priorities to expand our clients' services and win new business.”

Anything else?

  • Organic growth turned negative across all Omnicom markets in the fourth quarter and for the year as a whole, led by a 12.4% fall in the UK and declines of 9.4% in the US and 9.2% across Europe.

  • Looking at the year as a whole, both the US and North America declined by 10% while the UK was off by 11.5% and the rest of Europe fell 12.8%. Rounding out the sea of red, APAC countries declined by a collective 8.5%.

  • In the US healthcare once again proved to be a rare bright spot with a 3.3% increase for the year despite turning in a 3.3% decline for the fourth quarter.

  • PR meanwhile grew saw a 0.2% positive blip in the fourth quarter, courtesy of election-related spending, but contracted by 4.2% for the year overall.

  • Sports and live events proved to be another drag on Omnicom’s performance, with consumer experience declining 15.8% in the quarter and for the year, while execution and support declined 13.7% in the quarter and 15% for the year.

  • Performance marketing did offset some of these reverses however according to Wren.

  • Omnicom’s predicament contrasts with Publicis, which appears to have dodged the worst fallout from the pandemic thus far, registering a relatively benign 6.3% fall in organic revenues for 2020 – confounding expectations of a harder fall.

  • IPG reported a similar 6.1% year-on-year decline in Q4 net revenue to $2.28bn, down from $2.43bn the year previous. It expects revenue growth to resume later this year.

  • WPP is yet to declare its results which will be revealed in March.

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