Yesterday, Omnicom Group Inc. held its quarterly conference call to review the holding company’s first quarter financial results. In between announcements about the company’s diluted net income and the impact of COVID-19 pandemic on the global economy, CEO John Wren took a time-out to discuss and briefly criticize former CEO Wendy Clark for leaving DDB for Dentsu Aegis.
“We were a bit shocked and put off when Wendy Clark (earlier this month) decided that she was going to move on in the middle of a crisis,” Wren said, adding that DDB entered 2020 in a “difficult situation” due to several client losses. Wren then noted, “But we were able to recover with no interruption at all because Chuck Brymer, who’d previously been the CEO, was with us and ready to step back in and has done a magnificent job irrespective of [the] behavior of his predecessor.”
DDB’s “difficult situation” was most likely referring to the loss of McDonald’s and the shutting down of the QSR’s bespoke agency, We Are Unlimited. And while DDB Chicago did win the Army, Kroger and Playstation, the Chicago office also saw State Farm reassign its creative account to sister Omnicom shop, The Marketing Arm.
While Reel 360 has not reached out to Clark for comments, we did curate some reactions from advertising app, Fishbowl. Here, advertising pros let down their hair and speak their truth:
“She’s awful and the epitome of how to fail upward,” said one Associate Creative Director. “After her disastrous run at DDB, why would anyone be upset she left?” offered another Creative Director on Fishbowl.
An anonymous person from DDB gave Wren this advice, “Be happy John. Now she’s someone else’s problem.”
And finally a Creative Director summed up Clark’s move, “I’m glad someone high up is finally calling her out. Can’t believe how this industry rewards someone who sucks at their job.”
One post did come to Clark’s defense, ” There are other people more to blame for losing State Farm, Capitol One and Jeep all under a year.”
Worldwide Revenue Decreases
Wren went on to discuss, the negative effects of foreign exchange rates and disposition activity in excess of acquisitions over the past year. He shared that Omnicom’s worldwide revenue in the first quarter of 2020 decreased 1.8% to $3,406.9 million from $3,468.9 million in the first quarter of 2019.
The components of the change in revenue included a decrease in revenue from the negative impact of foreign currency translation of 1.4%, a decrease in acquisition revenue, net of disposition revenue of 0.7% and an increase in revenue from organic growth of 0.3% when compared to the first quarter of 2019.
Beginning late in the first quarter of 2020, revenue was also negatively impacted by the coronavirus 2019 (“COVID-19”) pandemic.
Organic growth in the first quarter of 2020 as compared to the first quarter of 2019 in the company’s five fundamental disciplines was as follows: Advertising decreased 0.1%, CRM Consumer Experience decreased 1.3%, CRM Execution & Support decreased 0.9%, Public Relations increased 0.2% and Healthcare increased 9.6%.
Across regional markets, organic growth in the first quarter of 2020 as compared to the first quarter of 2019 was as follows: the United States increased 1.7%, Other North America increased 0.6%, the United Kingdom increased 3.7%, the Euro Markets & Other Europe decreased 2.3%, Asia Pacific increased 2.0%, Latin America decreased 5.0% and the Middle East & Africa decreased 28.4%.
Operating profit in the first quarter of 2020 decreased $8.7 million, or 2.0%, to $420.2 million from $428.9 million during the fourth quarter of 2019. Our operating margin for the first quarter of 2020 decreased to 12.3% versus 12.4% for the first quarter of 2019.
COVID-19 Business Update
Wren also detailed how the COVID-19 pandemic has significantly impacted the global economy. Public health efforts to mitigate the impact of the pandemic include government actions such as travel restrictions, limitations on public gatherings, shelter in place orders and mandatory closures.
These actions have negatively impacted many of Omnicom’s clients’ businesses and in turn clients have reduced or plan to reduce their demand for our services.
As a result, the agencies experienced a reduction in revenue beginning late in the first quarter of 2020, as compared to the same period in 2019, and is expected to continue for the remainder of the year. Such reductions in revenue could adversely impact our ongoing results of operations and financial position and the effects could be material.
While we expect the pandemic to affect substantially all of our clients, certain industry sectors have been affected more immediately and more significantly than others, including travel, lodging and entertainment, energy and oil and gas, non-essential retail and automotive.
Clients in these industries have already acted to cut costs, including postponing or reducing marketing communication expenditures. While certain industries such as healthcare and pharmaceuticals, technology and telecommunications, financial services and consumer products have fared relatively well to date, conditions are volatile and economic uncertainty cuts across all clients, industries and geographies.
“Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to decline as marketers reduce expenditures in the short-term due to the uncertain impact of the pandemic on the global economy. As a result of the impact on our business, each of our agencies is in the process of aligning their cost structures, including severance actions and furloughs to reduce the workforce, and tailoring their services and capabilities to changes in client demand,” Wren said.
ALSO READ: DDB Worldwide responds to social distancing
Wren then explained that Omnicom has taken numerous proactive steps to strengthen its liquidity and financial position that we expect will help mitigate the potential impacts of COVID-19, including:
- The amendment and extension of our $2.5 billion credit facility to February 2025,
- The suspension of our share repurchase program,
- The issuance in February of $600 million 10-year 2.45% Senior Notes,
- The early redemption of the remaining $600 million of 4.45% Senior Notes that were due in August 2020,
- The issuance in early April of an additional $600 million 10-year 4.20% Senior Notes, and
- The completion in early April, of a $400 million 364-day revolving credit facility, which is in addition to our existing $2.5 billion revolving credit facility that expires in February 2025.