Jessica Goodfellow
Feb 12, 2020

Omnicom sees 3.5% organic growth in Q4, but struggles in some markets

A healthy Q4 saw mixed results in some geographies, while China stands out with negative growth in 2019, and current "uncertainty" expected to impact 2020 performance.

In the fourth quarter, the group's global revenue was $4.14 billion
In the fourth quarter, the group's global revenue was $4.14 billion

Omnicom Group enjoyed a stable fourth quarter with a 1.3% bump in total revenue and a 3.5% lift in organic revenue, although it witnessed declines in a number of geographies. Full-year revenue for 2019 decreased 2.2% to US$14.95 billion.

In the fourth quarter, the group's global revenue was $4.14 billion, while operating profit increased $19.2 million, or 3.1%, to $646.4 million. Revenue from organic growth, which is a key measure of an agency's success, was up 3.5% year-on-year.

While revenue for the 12 months ended December 31 declined 2.2%, the group's full-year organic growth increased by 2.8% over 2018. Operating profit for the 12 months decreased by $11.2 million, or 0.5%, to $2.12 billion.

This is a stronger performance than Publicis Groupe's 4.5% drop in organic growth in Q4 and 2.3% decline in organic growth for full-year 2019, following what chairman and chief executive Arthur Sadoun described as "a challenging year".

Looking at Omnicom Group's business units, Omnicom Health Group, the healthcare communications group, was a bright spot. In the quarter, organic revenue increased 12.9%, while the group had "an outstanding year" with a 9.5% increase in organic growth. This contributed to the group's overall growth in 2019, John Wren, Omnicom Group chairman and CEO, said on a call with investors. The group services more than 250 clients including the world's top 25 pharma and biotech companies. In 2019, it added 300 healthcare specialists to its roster, which now numbers more than 4,300 people. 

Elsewhere, the group's advertising and media agencies experienced a 5.1% increase in organic growth in Q4 and a 4.5% increase for the full year; while CRM Consumer Experience increased 3.3% in Q4 and 1.6% in the full year. Both CRM Execution & Support and Omnicom PR saw organic revenue decrease; by 6.0% and 2.5%, respectively, in Q4, and 3.2% and 2% for the full year.

"We’re pleased with our performance for Q4 and the full year 2019, and I’m confident that we are well positioned as we enter 2020," Wren said.

Regional breakdown

While Omnicom's overall Q4 revenue was solid, its geographical revenue was shaky, with a number of markets struggling in the fourth quarter.

Markets that saw organic growth increase in Q4 include 'Euro Markets and Other Europe' (4.7%), Asia Pacific (4.5%) the UK (3.3%) and the US (2.8%). 

The Middle East and Africa's organic growth increased 19.5% in the fourth quarter, although CFO Philip Angelastro noted that the region is not expected to be "significant or meaningful...as an overall percentage of Omnicom’s portfolio and Omnicom’s growth". It is the Group's smallest region.

'Other North America' decreased by 2.3%, Latin America decreased by 1.3%. 

Within Asia Pacific, Angelastro noted that Australia, South Korea and Thailand had solid performances, partially offset by reductions in Japan and Singapore. China had good results in the quarter, he claimed, after coming off a poor performance from Greater China in Q3. But he added that the Group "do not expect this to continue in the first-half of 2020, given the uncertainty in China". 

China challenge

In the full-year, China growth was down to "mid single digits", Wren revealed, although he added it accounts for "less than 1.5% of revenue".

This was "largely due to some performance challenges", Angelastro claimed.

"I think we lost a couple of clients. And frankly, as a portfolio, our agencies, with some exceptions, but our agencies didn’t perform as well as they did the year before, frankly," he said on the call.

Speaking on the impact of travel restrictions and business disruption during the novel coronavirus outbreak, he added: "I think the current situation presents a very different set of challenges. So until we get some more clarity and so the situation resolves itself, I think our expectations are similar to everybody else is there is just little bit too much uncertainty to have a clear picture as to how it’s going to roll out in China."

Wren said the virus has not affected January results, and that "work goes on for most clients". Interesting, he said some clients "are even spending more because of the products that they’re selling to the marketplace". Unsurprisingly, the group expects the events business to be most affected in Q1, with many events being cancelled.

Wren added that the agency's primary focus is "the safety of our employees". 

(This article first appeared on CampaignAsia.com)

Source:
Campaign India
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