Omnicom's latest results stand out in a world of change in the advertising industry.
The company beat analyst expectations to report full-year organic growth of 2.8% to $US14.95 billion. The numbers were also at the upper end of management forecasts.
Daniel Salmon, an analyst at investment bank BMO Capital Markets, says Omnicom's results show a "solid beat" on all key metrics.
"The steady, if not spectacular, FY20 outlook for 2% to 3% organic revenue growth and flat margins was at the lower end of expectations, but enough," Salmon writes in a note to clients. "And with China only 1.5% of revenue, coronavirus exposure appears limited for now."
He has a target share price of $83. They last traded at $78.14.
The US, representing more than half of Omnicom's revenue, posted organic growth of 2.8% in the quarter and the UK 3.3%.
The company described the performance by agencies in Australia as "solid", helping the Asia Pacific business to grow at 4.5% to $US456.8 million revenue in the December quarter, and by 2.2% in the full-year to $US1.65 billion.
Omnicom's strategy, as outlined at an analyst briefing by CEO John Wren:
- Hiring and retaining the best talent
- Driving organic growth by evolving and expanding service offerings
- Investing in areas of growth with a particular focus on data, analytics, digital transformation, CRM and Precision Marketing, e-commerce and Healthcare.
- Vigilant on managing costs and improving operational efficiencies in areas such as real estate, accounting, purchasing and IT.
Wren says data and analytics remain a top investment priority but that data can only take the company so far.
"It is our IP, our creativity that truly sets us apart," he told analysts when announcing the 2019 results.
"It is creativity and innovation, informed by data and analytics that will drive the most meaningful business results. One barometer we use to measure our success in cultivating the best talent in the strength of our agency brands is the performance of our client work and award shows."
Wren has also set up a Global Client Leaders Group on top of 12 practice areas including CRM and Precision Marketing, Advertising, Media, Public Relations, Retail, Branding, Healthcare, and Experiential.
"The Global Client Leaders Group provides clients a single point of access to our network of thousands of industry specialists in a variety of marketing disciplines," Wren told a briefing of analysts.
"Together, the global client and practice area leaders can deliver expertise and talent to our clients that is aligned with their business strategies and can tackle their marketing challenges."
One of the most sucessful and largest practice areas Omnicom Health Group, servicing more than 250 client companies including the top-25 pharma and biotech companies in the world.
Specialty healthcare agencies are focused on four key healthcare customers: healthcare professionals, payer organisations, patients and consumers, and medical experts and regulatory stakeholders.
In 2019, the group added 300 healthcare specialists to its roster, which now numbers more than 4,300 people.
"The group’s success is also due to its use of our data and analytical tools," says Wren.
"Over the past year, it has begun to use Omni, our people-based precision marketing and insights platform, to better understand healthcare professionals and patients’ online behavior.
"In doing so, Omnicom Health Group has successfully created more insightful, targeted and personalised communication strategies for its clients.
"All our agencies have access to our data and analytics tools, which we’ve invested in for over a decade. Omni is now available globally in the majority of markets in which we operate."
Healthcare revenue grew 9.5% in 2019 to $US1.15 billion bit it still represents just 7.7% of revenue.
Advertising is the biggest earner at 56.5% of total revenue, $US8.45 billion and with organic growth in 2019 of 4.5%, as this chart shows:
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