Global advertising group Omnicom believes it has passed the deepest low of the economic fallout from the coronavirus crisis.
The trend in the third quarter was positive.
CEO John Wren: “As we expected, the negative impact of COVID-19 on our business peaked in the second quarter, and we experienced significant improvements in the third quarter.”
However, the outlook for the December quarter is obscured by “challenges and uncertainties” including the year-end project spend normally expected from clients.
“I don’t have any clues to how Christmas is going to work out,” Wren said when briefing analysts on the results.
“I can assure you that every one of our agency leaders is looking at their business every single day.
“And we have alternative plans, both for growth and for some bumps in the road that we may hit.
“But we think the second quarter was the worst quarter. We saw improvement in the third, and we’re hoping for a similar improvement in the fourth.”
In the third quarter, organic growth, a widely used measure in the advertising industry, fell by 11.7% or $424 million.
The company saw improvements in the September quarter across all geographic regions.
The Australian business was a global stand out, with the organic growth down in "single digits". Organic revenue growth in Asia Pacific for the quarter was a negative 12.8%.
Worldwide revenue dropped 11.5% to $US3.2 billion, an improvement on the 24.7% fall in the June quarter.
Operating profit increased $28.1 million, or 5.9%, to $501.4 million.
“Our largest industry sectors had significant sequential growth, with pharma and health as well as technology growing in the third quarter versus the prior year,” says Wren.
“As anticipated, some of our clients’ industries that have been hit the hardest, such as travel and entertainment, as well as our events businesses continue to be challenged.”
The company has been reining, reducing debt and overheads. However, voluntary pay cuts across the group will be phased out by the end of the year.
Wren says Omnicom is positioned to take advantage of the changes during the pandemic.
“For more than a decade, we’ve invested a substantial amount of time and money in the areas of analytics, insights, precision marketing, and digital transformation services,” he says.
“These investments enable our companies to put the consumer at the centre with data-driven digital and personalized offerings.”
However, Wren sees challenges in the fourth quarter.
“First is the trajectory of the virus globally, which will impact the pace of economic recovery in each country we operate in.
“Next is the outcome of the US election and potential delays in its results.
“Third is the timing and effect of government stimulus programs in the US and around the world."
The Q3 numbers:
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