Global advertising group Omnicom is closely watching cash flow and costs as the coronavirus pandemic puts at risk its revenue base.
In an update to the market, the company says it is controlling discretionary costs, its cash position and liquidity to mitigate the effect of COVID-19.
Omnicom, like the rest of the advertising industry, is finding it hard to make firm forecasts. The coronavirus crisis is unprecedented.
“We are unable at this time to predict the impact of COVID-19 on our operations and liquidity, and depending on the magnitude and duration of the COVID-19 pandemic, such impact may be material,” says CEO John Wren.
He expects a fall in cash flow from operations as a result of the impact of COVID-19.
Omnicom has a $US2.5 billion credit facility which expires in 2025. It also has cash and short-term investments of $US4.3 billion.
The company has been making gains in a challenging advertising market. in February it posted posted full-year organic growth of 2.8% to $US14.95 billion, ahead of analyst expectations and at the upper end of management forecasts.
Wren says the company has been closely monitoring the pandemic and its impact on staff, clients and operations.
The majority of staff around the world are working remotely. The big holding companies were quick to get their staff working from home to help limit the spread of the coronavirus.
“Our teams have pivoted quickly to develop insights and creative ideas that can assist our clients and their customers in this new environment,” he says.
“While it is too early to predict the full impact of the pandemic on our business, we are confident that Omnicom has the expertise and resources necessary to weather this difficult period."
However, government actions, such as travel restrictions, limitations on public gatherings and mandatory business closures, pose a risk.
“Clients may reduce their demand for our services and could result in a reduction in our revenue, which would adversely affect our operations,” he says.
“We have a diversified portfolio of businesses, geographies and clients, some of which will be impacted more significantly than others.”
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at firstname.lastname@example.org