Omnicom expects a slower pace in 2023 as it faces, like the rest of the advertising industry, turbulent economic conditions, but still sees organic growth of 3% to 5% over the year.
This is weaker than the December quarter organic growth rate of 7.2% but the company, briefing market analysts in the US, says it has entered the year in a good position, supported by a strong financial performance, new business wins and steady progress on key strategic initiatives.
The company sees growth from clients in healthcare. However, downside is in the tech sector, with 10% of Omnciom's revenue in 2022, where layoffs have been widespread as digital advertising growth slows.
CEO John Wren: “We also continue to see strong demand for our services.
“At the same time, we remain extremely cautious of macroeconomic and geopolitical factors, including the ongoing war in the Ukraine, the economic risk posed by rising interest rates and higher inflation around the world.
“To be prepared, we continue to actively develop plans to respond to the headwinds from macro factors, and I'm confident we can manage through this economic cycle.”
And that means costs. CFO Phil Angelastro: “Given the uncertainty of the macro and business conditions currently, we certainly plan the business to align our cost structures with our expected revenues as we know them.
“We’re somewhat conservative about how we do it because we don’t want to be relying on plans that have unsupported new business assumptions where we maintain a cost structure that isn’t sustainable. It isn’t effective and efficient in achieving our margin objectives.
“We, like everyone else, have experienced some wage pressures. But there’s a number of other initiatives we’ve been pursuing.
“We’re going to continue to pursue … outsourcing, offshoring and automation.”
And where will growth come from in 2023?
Craig Huber, analyst at Huber Research Partners, asked: “What industry sectors are you most bullish about when you compare it to that 3% to 5% initial organic revenue growth outlook for this year? Is it healthcare, travel, retail?”
Wren: “The one that I can point to with real confidence is healthcare. I think there are increasingly new discoveries, new products all the time in the healthcare area. I'm confident that everybody on the planet is going to have to eat food and drink beverages.
‘Our tech sector, I think we're going to suffer, get a little pain there. We plan accordingly because of the pain some of those companies are going through. But they'll reinvent themselves very, very quickly, and I'm very happy to have them as clients, even if they're facing challenges.
“In the auto sector, I think two interesting things are going on and clients have to continue to market in order to address this.
“One is there hasn't been a lot of new product in the past three years because of the supply chain problems which have now been, for the most part, solved by most major car manufacturers.
“And the second thing, which clients have to continue to bring their brands and promote their brands in order to be participants in this area, is electric cars and the requirements of that to show progress in their product.
“On travel, I'm not going to comment. I can speak for the Wren household, nobody shied away from it, but I don't know that much about anything else.
“Our clients are bullish. But everybody -- every CEO that I speak to -- truly believes in their products, believes in their future, and is cautious and appropriately cautious about the financial conditions … and where interest costs are going to go."
Sectors revenue in 2022 compared to 2021:
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