Omnicom grew strongly in the first quarter of 2022 with organic growth up 11.9%, ahead of rival Publicis with 10.5%.
But operating profits were hammered by the war in Ukraine, falling 24.5% to $112.4m with net revenue down 0.5% to $3.4bn. Omnicom was the last of the big holding companies to disentangle itself from Russia following the war’s outbreak and these number suggests it was an expensive business.
The owner of BBDO, DDB, TBWA and Omnicom Media Group among many others, still grew strongly in all regions; 10.6% in the US, 11.1% in Europe (13.8% UK) and 9.3% in Asia. Omnicom is forecasting growth of between 6-6.5% for the year, higher than its rivals to date.
On the war in Ukraine Omnicom says: “We have historically conducted operations in Russia and Ukraine through local agencies in which we hold a majority stake. The minority partners in these agencies are local management, which report to the applicable Network management.
“During the first quarter of 2022, the war in Ukraine required us to suspend our business operations in Ukraine. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union that affect the cross-border operations of businesses operating in Russia. In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding our ability to recover our investment in our businesses in Russia, as well as our ability to exercise control over the operations. Also, many multinational companies, including many of our large clients, ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia without additional funding, which we will not provide, is uncertain.”
On business as a whole CEO John Wren (above) says: “Our strong momentum continued in the first quarter with 11.9% organic revenue growth, reflecting our persistent focus on achieving better outcomes for our clients across all our business disciplines.
“We continued to invest in areas important to our clients’ growth, continued to make acquisitions in strategic areas of growth, and repurchased a significant amount of our shares. Despite uniquely challenging global events, we remain confident that our high-quality and diverse portfolio positions us strongly for future growth, both in 2022 and beyond.”
The economic consequences of war in the Ukraine are beginning to hit companies of all stripes as well as Russia. The International Monetary Fund (IMF) this week revised its forecast for global growth sharply downwards, with inflation gathering pace and living standards falling. It said the UK, hitherto a strong performer post-pandemic, would be hardest hit in Europe.
There will be mounting pressure from all sides to find some sort of acceptable resolution in Ukraine.