War in Ukraine Affects Omnicom’s Second Quarter Revenue and Operating Profit | Advertisement

Omnicom posted organic growth of 11.9% in the second quarter as its business continues to rebound from the pandemic. But the holding could not escape the impact of the war in Ukraine, which continues to shake the global economy.

Omnicom suspended operations in Russia in February, ceding control of its majority-owned agencies in the market to local operators. It was also forced to close its operations in Ukraine due to the shutdown of the local economy.

As a result, revenue fell 0.5% year over year to $3.4 billion. Operating profits fell 24.5%, by $112.4 million, causing margins to fall to 10.4% from 13.6% last year.

Omnicom will continue to operate cautiously as uncertainty around the Ukraine crisis, pandemic, supply chain and inflation persists, CEO John Wren said on the earnings call on Tuesday.

“Customers recognize the uncertainty,” he said. “They’re not backing down from spending or investing in their brands, but there’s uncertainty.”

But strong organic growth, thanks in part to high inflation, led Omnicom to raise its full-year guidance to between 6% and 6.5% – the first time it has done so after the first quarter in 26 years.

Customers who raise prices to stem inflation spend more on media. Chief Financial Officer Phil Angelastro cited a “gain on sale of business” of $50 million in the second quarter and said he expected “improved operating performance” for the year, in partly due to high prices.

In the United States, organic growth of 10.6% was driven by precision marketing, advertising and media and public relations. The UK recorded organic growth of 13.8% and the rest of Europe recorded growth of 11.1%. In Asia-Pacific, organic growth was 9.3% year-on-year.

“Most of our markets began to improve year-on-year in March 2021, and the improvement continued through the first quarter of 2022 as customers significantly increased their spending on our services” , Wren said.

By discipline, commerce and brand consulting services grew nearly 68% year-over-year, while advertising and media grew 20.3% year-over-year. Public relations also increased by 14%, while health care increased by 7.7%.

Precision marketing, a major area of ​​investment for Omnicom, grew nearly 14% year over year. Angelastro cited consultancy Credera as performing “exceptionally well,” and Wren spoke of Omni ID, which the holding company spent “quite a lot of money” testing and proving to customers.

“Privacy is going to be a constant theme for a very long time,” he said.

Marilyn J. Hernandez