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Omnicom Q1 financial results reveal revenue dip post-Russia withdrawal

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By Kendra Clark | Senior Reporter

April 19, 2022 | 7 min read

New York-based holding company Omnicom Group (OMC) filed its first-quarter financial results yesterday after the stock market closed. The company, whose portfolio includes top agencies such as BBDO Worldwide, TBWA Worldwide, DDB Worldwide and Omnicom Media Group, saw revenue tumble 0.5% due to charges associated with the war in Ukraine and the company’s decision to cease all operations in Russia earlier this year. Its first-quarter results filing reflects the company’s Russian business only through the end of February.

Omnicom’s chairman and chief executive officer John Wren kicked off an investor call Tuesday afternoon with an acknowledgment of the ongoing conflict. “Our focus remains the safety and wellbeing of our Ukrainian colleagues and their families,” he said. He noted that the company is still focused on delivering humanitarian aid to those in need and emphasized that the firm “will continue to offer whatever assistance is necessary” to its employees in the region.

Despite the blow to revenue, Omnicom’s financial results looked fairly strong – the company saw 11.9% organic revenue growth and anticipates strong performance through the rest of this year. “Overall, we’re very pleased with our quarterly results,” said Wren.

Omnicom logo

On Tuesday afternoon Omnicom shared impressive first-quarter financial results / The Drum

What do the results show?

  • Omnicom Group saw its revenue of $3.41bn drop 0.5%, largely due to charges associated with the war in Ukraine

  • Operating expenses were up 3.2%, equating to $95.8m, reaching about $3.05bn above the first quarter of 2021. This dip includes a 2.5% drop from the impact of foreign currency translation, as well as charges associated with the war in Ukraine

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  • Charges associated with the war in Ukraine and the withdrawal of Omnicom business in Russia totaled $113.4m, which impacted the company’s operating profit. From Q1 of last year, operating profit fell $112.4m, or 24.2%, to $353m. The company’s operating profit margin dropped from 13.6% to 10.4%. However, excluding Russia-Ukraine-related charges, the adjusted operating profit saw a 0.2% lift and the adjusted operating profit margin reached 13.7%

  • EBITA in the first quarter of this year dropped $112.9m, or 23.3%, to $372.4m compared to the first quarter of 2021. The company’s EBITA margin of 10.9% dropped from 14.2%. Again, Omnicom credits charges surrounding the Russia-Ukraine conflict for the decline in performance. Excluding these charges, the company’s adjusted EBITA of $485.8m increased 0.1%. The adjusted EBITA margin came to 14.2%

  • Net income for Q1 decreased 39.6%, to $173.8m, compared with Q1 of last year. Despite these losses, the company tallied 11.9% organic revenue growth, equating $408m

  • Earnings per share for the quarter, adjusted for non-recurring costs (such as the Ukraine-Russia charges), were $1.39 – up 4.5% compared to last year

  • “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

Which regions and practice areas performed the best?

  • Strong year-on-year organic growth was seen across all regions. In North America, the US saw a 10.6% lift, while the rest of the continent clocked growth of 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 Q1 of 2022, compared with the same period last year, was up across all of Omnicom’s major disciplines. It jumped 9.1% for its Advertising and Media practice, 20.3% for its Precision Marketing practice, 13.8% for Commerce and Brand Consulting and 68% for Experiential. The company’s other disciplines, including Execution and Support, Public Relations and Healthcare, all saw leaps in organic growth too, but to a lesser extent

  • The company noted that there is growing demand from clients for retail, e-commerce and DTC-related services as the impact of the pandemic wanes

  • Omnicom also highlighted that it is keeping a close eye on experiential marketing, demand for which is rapidly rising as consumers and businesses resume in-person events

What does Omnicom Group predict for the remainder of 2022?

  • Though the company is proceeding with caution, it anticipates a strong year ahead. “While we’re off to a strong start in 2022,” said Wren, “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.”

  • Wren also predicted that the holding company will deliver the same “strong operating margins” for the full year of 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.”

  • The chief executive explained that Omnicom is continuing to invest in “high-growth areas” such as CRM, precision marketing, digital transformation, data and analytics, performance media, e-commerce and the health sector. These ambitions have been realized most clearly in Omnicom’s recent acquisition of global digital experience consultancy TA Digital in early March

  • Further, Wren stressed that Omnicom, like all of the world’s top marketing groups, is focused on creating new ad targeting and measurement solutions for the post-cookie world. He boasted about the company’s proprietary cookieless identity-based solution, OmniID, which he said promised “reach and precision” in a “privacy-compliant” and “future-proof” way

  • Wren also made a point to emphasize the holding company’s ongoing investments in diversity, equity and inclusion. “In 2021, we saw meaningful progress in our workforce diversity across all professional levels in the United States. We’re not done, and will continue to drive improvements throughout 2022.”

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