Omnicom Group Inc. joined rival advertising holding company Publicis Groupe PLC in beating analysts’ expectations in the first quarter, suggesting that parts of the ad business are recovering from pandemic-induced spending halts, budget cuts and other challenges.
The New York-based ad giant, which owns agencies including BBDO, DDB and OMD, said world-wide revenue in the first quarter increased 0.6% to $3.43 billion, from $3.4 billion in the same period a year earlier.
That topped revenue expectations of $3.25 billion, according to estimates from FactSet.
“It’s taken some time to turn the corner, and we’re now on a clear path to return to growth,” said John Wren, Omnicom’s chief executive, during the company’s earnings call. “At same time, we know we must continue to monitor the Covid-19 situation and adapt to any unforeseen challenges that may arise. If 2020 taught us anything, it’s to expect the unexpected.”
He added that as the economy and business emerge from the pandemic, the company expects to grow at a faster pace than in previous years.
Organic revenue—a key metric that strips out currency effects and acquisitions—decreased 1.8%. The decline beat expectations of a drop of more than 6%, according to FactSet. The company attributed the dip to the negative effects of Covid 19 on its business, but said the impact from the pandemic is waning in several markets. By contrast, organic revenue decreased 9.6% in the fourth quarter of 2020.
Omnicom’s CRM Precision Marketing discipline saw a 7.2% increase in organic revenue, the company said, breaking out various relationship-marketing categories for the first time. CRM Experiential, which includes the company’s events business, decreased 33.2%. Omnicom defended the business, saying that in the U.S. it has continued to do strategic work for some clients and expects demand for its services to return with large events.
The company’s PR business decreased 3.5% while advertising increased 1.2%. Healthcare was flat, in part due to a tough comparison to last year’s healthcare growth in the first quarter. Media grew in the first quarter, although not robustly relative to the first quarter of last year, the company said.
The company expects media to grow faster this year based on positive spending forecasts but said the media mix may change in favor of digital media. “Digital has really taken over and we’ve crossed the threshold,” Mr. Wren said during the call.
Organic revenue decreased 1% in the U.S., 3.2% elsewhere in North America, 6.4% in the U.K., 3.2% in European markets, 2.4% in Latin America and 10.2% in the Middle East and Africa. Asia Pacific increased 2.5%, according to the company.
Omnicom said it plans to become more aggressive about acquisitions in precision marketing, commerce, media, healthcare and marketing technology and digital transformation. The company recently agreed to acquire a majority stake in digital marketing company Areteans.
Diluted net income per share for the first quarter of 2021 was $1.33 per share compared with $1.19 in the first quarter of 2020. The company beat expectations of $1.13, according to FactSet.
Publicis Groupe said last week that its organic revenue increased 2.8% in the first quarter, ending a streak of declines during the pandemic.
Write to Alexandra Bruell at [email protected]
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