Omnicom global revenue decreases 1.8% in Q1 as 'demand for services expected to decline'

Omnicom Group’s worldwide revenue slipped 1.8% in the first quarter of 2020.

It decreased to $3,406.9 million from $3,468.9 million compared to the same period last year, primarily due to the negative effects of foeign exchange rates and disposition activity in excess of acquisitions, said the network during an earnings call on Tuesday.

But diluted net income per share rose two cents, or 1.7%, to $1.19 compared to $1.17 for the first quarter of 2019. 

The report comes as leadership issued a gloomy forecast amid COVID-19 economy chaos. 

Part of the company’s statement read: "The COVID-19 pandemic has significantly impacted the global economy. Public health efforts to mitigate the impact of the pandemic include government actions such as travel restrictions, limitations on public gatherings, shelter in place orders and mandatory closures. These actions have negatively impacted many of our clients' businesses and in turn clients have reduced or plan to reduce their demand for our services. 

"As a result, we experienced a reduction in our revenue beginning late in the first quarter of 2020, as compared to the same period in 2019, and is expected to continue for the remainder of the year. Such reductions in revenue could adversely impact our ongoing results of operations and financial position and the effects could be material."

Omnicom highlighted that while it expects the pandemic to "affect substantially" all of its clients, certain industry sectors have taken a more immediate and significant hit than others, including travel, lodging and entertainment, energy and oil and gas, non-essential retail and automotive. 

The statement continued: "Clients in these industries have already acted to cut costs, including postponing or reducing marketing communication expenditures. While certain industries such as healthcare and pharmaceuticals, technology and telecommunications, financial services and consumer products have fared relatively well to date, conditions are volatile and economic uncertainty cuts across all clients, industries and geographies. 

"Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to decline as marketers reduce expenditures in the short-term due to the uncertain impact of the pandemic on the global economy. 

"As a result of the impact on our business, each of our agencies is in the process of aligning their cost structures, including severance actions and furloughs to reduce the workforce, and tailoring their services and capabilities to changes in client demand."

Organic growth in the first quarter of 2020 as compared to the first quarter of 2019 in Omnicom’s five fundamental disciplines was: Advertising decreased 0.1%; CRM Consumer Experience decreased 1.3%; CRM Execution and Support decreased 0.9%;  Public Relations increased 0.2% and; Healthcare increased 9.6%.

Regional market organic growth looks like the following: The United States increased 1.7%; Other North America increased 0.6%; the United Kingdom increased 3.7%;  Euro Markets & Other Europe decreased 2.3%; Asia Pacific increased 2.0%; Latin America decreased 5.0% and; the Middle East & Africa decreased 28.4%.