Alison Weissbrot
Jul 21, 2021

Q2 earnings: Omnicom grows 24% organically off pandemic dip

Organic growth rose double digits across disciplines and regions, but will taper off as year-over-year comps weaken.

(Getty)
(Getty)

Last year during Q2, the world was under lockdown at the height of the pandemic, causing business performance to plummet for large marketers and their agencies.

One year later, that’s turning around, as evidenced by Omnicom’s strong double-digit growth across regions in Q2 2021. Organic growth globally rose 24% in Q2 to US$682 million, leading worldwide revenues to clock in up 27.5% at $3.57 billion.

The rebound was driven by double-digit growth across regions and disciplines, said CEO John Wren on Omnicom’s Q2 earnings call on Tuesday (July 20). “We've rounded the corner into positive growth,” he said.

Across disciplines, Omnicom’s advertising business grew 29.8% globally, CRM precision marketing grew 25% and CRM commerce and brand consulting grew 15.2%. PR grew 15.1% and healthcare grew 4.5% off stronger year-over-year comps (healthcare was the only discipline that grew in Q2 2020.)

CRM experiential, which includes Omnicom’s events and experiential businesses, grew 53% year over year, indicating a strong appetite for a return to live events once conditions are safe. Wren added that in China, where the pandemic has been under control for longer, the events business had “a strong quarter.”

Omnicom also grew double digits across all regions, including 19.9% in the United States and 37.1% in other North American markets; 23.8% in the United Kingdom and 34.5% in other European markets; and 27.8% in APAC. Growth also increased 20.8% in Latin America and 42.8% in the Middle East and Africa.

“We expect to continue to see positive organic growth as client spend increases,” Wren said, “albeit at a slower pace than Q2.”

The strong results were bolstered by the sale of ICON International, Omincom’s barter agency, resulting in $50.1 million in operating profit. Omnicom is now “substantially complete with disposals” and will look for “accretive acquisitions in precision marketing, martech and digital transformation, commerce, media and healthcare,” Wren said.

“It’s almost back to the early 2000s in terms of the number of companies we’re looking at [for M&A],” Wren said.

Back to work

As clients start spending again, Omnicom is hiring after laying off almost 6,000 employees during the pandemic.

But the competition for talent is stiff. In the US in particular, there is “pressure on staff costs as the labor market remains tight,” Wren said.

Omnicom is staffing up to support new business wins, including WaterWipes’ integrated account, as well as business expansion with existing clients such as Philips’. Wren stressed the importance of winning integrated accounts but also that the group can “simplify and organise our services in a manner that meets client needs,” including bespoke local solutions.

Wren expects “an increase in new business activity in CPG, luxury, healthcare, retail and auto” as the economy continues to recover. And he’s bullish on precision marketing, media, healthcare and experiential as the latter continues to bounce back.

The holding company is encouraging people to return to the office based on local conditions, and warned investors that costs related to office space and travel will likely rise as a result.

“Overall, we believe a return to an office-centric culture will enable us to invent, collaborate and win together to offer the best service for clients,” Wren said. “[The return] will be grounded in safety and flexibility, and local leaders will determine what combination of office and remote work is most effective for their teams.”

For good

Omnicom also called out progress on sustainability and DE&I initiatives on the earnings call, indicating the growing importance of both areas in the agency sector and to investors.

On the sustainability side, Omnicom joined initiatives such as Ad Net Zero, which aims to get the organisation to net carbon neutral on the creation and distribution of ads, as well as Change the Brief, designed to harness advertising to promote sustainable choices.

On the DE&I front, work is still in progress, but Omnicom touted having “the most diverse board” in the S&P 500, with six women and four African-American members. Three of Omnicom’s 12 network and practice area CEOs are women or people of color, and 

Omnicom has doubled the number of DE&I leaders across the group in 2020.

Wren called it “a key step to ensure DE&I is embedded across the leadership agenda with full commitment and accountability for network and practice area CEOs.”

Source:
Campaign US

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