Diana Marszalek 29 Jul 2020 // 2:25AM GMT
NEW YORK — Omnicom’s PR agencies took a substantial financial hit in Q2, with revenue dropping 13.9% year-over-year during the height of the pandemic.
In its second quarter earnings report, the holding group reported companywide losses during the three months ending June 30, primarily due the Covid-19 shutdown. According to its earnings report, Omnicom as a whole during Q2 saw its worldwide revenue decline 24.7% to $2,800.7 million from the same period one year earlier.
Omnicom PR Group — whose agencies include FleishmanHillard, Ketchum and Porter Novelli — experienced less of a loss than other Omnicom disciplines including advertising, which was down 26.6%; CRM consumer experience, which decreased 25.6% and CRM execution & support decreased 27.6%. Healthcare increased 3.2%.
All of which occurred against the backdrop of Omnicom and its agencies, including its PR firms, implementing layoffs and furloughs around the world in response to business drying up. During his first quarter earnings call, CEO John Wren predicted the virus would lead to sweeping change throughout the industry.
PR revenue had earlier risen a tick during Q1 of this year.
Omnicom included the following in its Q2 2020 report:
The COVID-19 pandemic has significantly impacted the global economy, our business and the results of operations. 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 our clients' businesses and in turn clients have reduced or plan to reduce their demand for our services. As a result, we experienced a reduction in our revenue beginning late in the first quarter of 2020, as compared to the same period in 2019. The reduction in our revenue continued during the second quarter of 2020 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. During the second quarter of 2020, we realigned our agencies' cost structures, which included severance actions and furloughs to reduce the workforce, right-of-use asset impairments and other real estate costs, a net loss on the disposition of certain subsidiaries and other charges. These actions were taken to tailor their services and capabilities to changes in client demand.
As we previously reported, in March 2020 and early in the second quarter of 2020, we have taken numerous proactive steps to strengthen our liquidity and financial position over the past several months 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, which were used to finance 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.
We have no long-term debt maturing until May 2022.