Credit: Tim Umphreys via Unsplash
The biggest slice of Omnicom’s new target for cost savings from its takeover of IPG, now doubled to $US1.5 billion, will come from headcount.
The global advertising group, the world’s biggest, wants the savings over the next thirty months, starting with $US900 million this year.
Of that $US650 will come from labour-related costs, according to a presentation post the release of December quarter results.
In its first results announcement since the takeover, Omnicom recorded revenue of $US5.5 billion in the December quarter and a net loss of $0.9 billion.
The takeover of IPG, which was finalised in November last year, created the world’s biggest global advertising group with 100,000 people and expected full year revenue of $US25.6 billion.
In the process, thousands of jobs have been lost as the most senior executives share a reported $US80 million bonus, including $US49 million to former IPG chief executive Philippe Krakowsky.
The company, with about 50% of its revenue from media, said it hasn't yet completed 2026 planning. This will be revealed next month at an investor day presentation.
However, the expanded cuts are going ahead.
“Our integration planning enabled us to identify significantly greater synergies than we had initially communicated at the announcement of the Interpublic acquisition,” CEO John Wren told analysts in a briefing.
The targets for savings include $US1 billion from reductions in labour through the elimination of duplicative corporate, network and operational functions.
Omnicom will also streamline regional, country and brand structure, “shifting” to a more unified resourcing model, including accelerating outsourcing and offshoring.
“Additionally, across every area of our business, we are evaluating and deploying automation and AI to improve how we service our clients and run our operations,” Wren said.
He also sees $240 million of synergies related to real estate consolidation.
Announcing December quarter results, with only one month of IPG cost and revenues, Omnicom recorded severance and repositioning costs of $1.1 billion.
The usual organic revenue growth metrics were not included in the results presentation.
CFO Phil Angelastro told the analyst this was because of the size of the acquisition of IPG, the scale of the implementation of integration strategy across service lines, geographies and operating platforms, as well as plans to reposition the business through disposing of certain parts of the portfolio.
However, he said that, excluding planned dispositions and assets held for sale, organic growth in the December quarter would have been about 4%.
Wren said there has been a lot of enthusiasm from groups that have been combined within the company
“The attitude and the optimism that is shared all the way down through our employee base about what position Omnicom Group Inc. is in, what capabilities we have when we join these two groups together, and the resources that we will have to pivot and change where necessary in making the correct investments to keep us a leadership position,” he said.
“So across the board, it is far better than I fully expected because I always anticipate that there will be some negativity, but we have not seen any of that in any particular place in the group.”
A slide from the presentation to analysts:
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