The outlook is good for New York-based holding company Omnicom Group. It reported strong fourth quarter and annual earnings crediting its focus on digital, precision marketing and consulting. It also promised to invest more in AI, automation, e-commerce and data and analytics.
Omnicom Group, which counts industry heavyweights BBDO Worldwide, TBWA Worldwide, DDB Worldwide and Omnicom Media Group among its subsidiaries, closed out the fourth quarter of 2021 with better-than-expected revenues and rising profit.
“Global organic revenue growth… exceeded our expectations in the fourth quarter, operating profit margins remained very strong, and we posted solid quarterly earnings per share,“ John Wren, the company’s chairman and chief executive officer, said on the call. “I’m very pleased with our financial performance for the quarter and year and optimistic about our prospects heading into 2022.”
What do the results show?
Omnicom Group saw revenues grow 2.6% year-over-year (YoY), reaching $3.86m. The spike included a 9.5% lift in organic growth. The $50.5m sale of ICON International, a specialty media business, last June also led to a decrease in acquisition revenue, net of disposition revenue of 6.6%, which ultimately aided revenue growth.
On a per-share basis, Omnicom Group said it has a profit of $1.95, up 6% compared to 2020.
Operating profit saw a YoY lift of 1.3%, or $7.8m, bringing operating profit to $622.5m. Meanwhile, operating margin decreased slightly, from 16.4% to 16.1%.
Net income for the quarter was up $18.1m, or 4.5% YoY, reaching $416.2m.
Q4 EBITA rose 1.1%, or $7.3m, to $642.7m, compared to the same period in 2020. The company’s EBITA margin dropped slightly from 16.9% to 16.7%.
The organization’s full-year results indicate strong performance. Total revenues for the year increased 8.5% to $14,289.4 – up from $13,171.1 in 2020. Operating profit was up 37.5% or $599.1m compared to 2020, with operating margin growing from 12.1% to 15.4%. However, operating profits did rise 4.5% for the year, due to the impacts of foreign currency translation, salary and service costs and an increase in third-party service costs – though some of these costs were offset by the sale of ICON International.
As it stands, Omnicom shares are up 7% compared to the start of the year, but still 8.58% lower than its high of $86.38 that it hit in early May of 2021. The company’s stock is faring better than the S&P 500 generally, which has dropped 5.15% from the start of this year.
Which regions and sectors performed the best?
Chairman and chief executive John Wren credited a strong team and a “focus on digital, precision marketing and consulting” for ushering in strong quarterly and annual results.
The business saw YoY organic growth in 2021 increase across all of its major practices, witnessing lifts of 10.7% for advertising, 19% for precision marketing, 9.9% for commerce and brand consulting, 27% for experiential marketing, 4.2% for execution and support and 6.3% for public relations. It also saw a minor lift of 4% for healthcare; this number may rise in the coming quarter, as the company earlier this month acquired digitally-native healthcare-focused agency Propeller. The terms of the acquisition were not disclosed.
Wren pointed out that experiential in particular helped buoy results in Q4. “We… benefited from the continuing rebound in our experiential disciplines. As more in person events resumed in Q4, our revenue performance flowed through to our operating profit and bottom line,” he said.
The group’s precision marketing discipline saw an especially strong period, too, which Wren says is the result of winning deals with some of the world’s biggest brands including Philips, Mercedes, Nike and Diageo.
For the fourth quarter, the organization saw YoY organic growth across all of its regional markets, with the biggest lift – of 48.1% – seen in the Middle East and Africa. Organic growth was up 7.8% for the US market, 1.8% for other North American regions, 10.1% for the UK, 12.7% for the rest of the European market, 7.8% for Asia Pacific and 7.3% for Latin America.
The group’s annual results also reflected strong organic growth across regions: 8.1% for the US, 11.7% for other North American regions, 8.8% for the UK, 13.6% for the rest of the European market, 13.7% for Asia Pacific 9.4% for Latin America and 26.4% for the Middle East and Africa.
What does Omnicom Group predict for 2022?
Looking forward, the company is forecasting organic revenue growth of between 5 to 6% for 2022. “With the pace of change in the digital space accelerating, we’ve continued to evolve our existing capabilities and invest in new and innovative offerings to meet the needs of our clients and future prospects,” said Philip J Angelastro, executive vice-president and chief financial officer at Omnicom Group. “For the full year of 2022, we anticipate delivering the same strong reported operating profit margin 15.4% that we delivered in 2020,” said Angelastro. “And as always, we will continue to focus on growing our operating profit.”
Angelastro pointed out that while the company expects that certain costs will bounce back to pre-pandemic levels, some of these higher costs may be offset by reduced “discretionary and infrastructure costs” – the result of new models of working and increased efficiencies. will resulting from new ways of working and efficiencies achieved during the pandemic.
To drive growth, the organization plans to focus both on offering more services to existing clients and on accelerating integration by increasing the number of clients who consolidate their services with Omnicom.
Omnicom plans to invest more in the coming year in artificial intelligence, automation, e-commerce performance media and data and analytics. Wren also said the business will invest in “high-growth industries” like gaming, hinting that perhaps the group will be expanding its metaverse and web3-related offerings.
The group will continue to focus on developing talent and investing in effective succession planning. In November of 2021, the group announced two major leadership changes: the promotion of Daryl Simm to president and chief operating officer of Omnicom Group from his former position as chief executive officer of Omnicom Media Group, and the appointment of Florian Adamski to chief executive of Omnicom Media Group in his place. The organization said that developing its leadership will remain a high priority in 2022.
Omnicom said that it plans to expand on its existing sustainability and diversity, equity and inclusion initiatives. In 2021, the organization grew these efforts and brought on new leadership to drive change, helping clinch the organization’s place on Newsweek’s 2022 list of America’s Most Responsible Companies. “We aim to achieve more in the new year so we can ensure Omnicom agencies are a destination of choice for top talent,” Wren said.