NEW YORK, Feb. 18, 2021
/PRNewswire/ -- Omnicom Group Inc. (NYSE: OMC) today announced net
income - Omnicom Group Inc. for the fourth quarter of 2020 of
$398.1 million compared to net income
- Omnicom Group Inc. of $415.0
million in the fourth quarter of 2019. Diluted net income
per share for the fourth quarter of 2020 was $1.84 per share compared to diluted net income
per share of $1.89 for the fourth
quarter of 2019.
Net income - Omnicom Group Inc. in the fourth quarter of 2020
includes a net aggregate after-tax decrease of $13.0 million related to asset impairment charges
recorded during the period, partially offset by reimbursements and
tax credits under government programs in several countries where we
have operations, as discussed further below.
Primarily due to the negative effects on our revenue
attributable to the COVID-19 pandemic, Omnicom's worldwide revenue
in the fourth quarter of 2020 decreased 9.3% to $3,757.0 million from $4,141.2 million in the fourth quarter of 2019.
The components of the change in revenue included an increase in
revenue from the positive impact of foreign currency translation of
0.8%, a decrease in acquisition revenue, net of disposition revenue
of 0.5% and a decrease in revenue from negative organic growth of
9.6% when compared to the fourth quarter of 2019.
Organic growth in the fourth quarter of 2020 as compared to the
fourth quarter of 2019 in our five fundamental disciplines was as
follows: Advertising decreased 9.7%, CRM Consumer Experience
decreased 15.8%, CRM Execution & Support
decreased 13.7%, Public Relations increased 0.2% and
Healthcare decreased 2.0%.
Across all of our regional markets, organic growth was negative
in the fourth quarter of 2020 as compared to the fourth quarter of
2019. The decreases were as follows: the
United States 9.4%, Other North America 3.2%, the
United Kingdom 12.4%, the Euro
Markets & Other Europe 9.2%, Asia
Pacific 3.9%, Latin
America 9.2% and the Middle
East & Africa 36.8%.
Operating profit decreased $31.7
million, or 4.9%, to $614.7
million compared to $646.4
million during the fourth quarter of 2019. Our
operating margin for the fourth quarter of 2020 increased to 16.4%
versus 15.6% for the fourth quarter of 2019.
Operating profit for the fourth quarter of 2020 includes a net
decrease aggregating $11.1 million
due to asset impairment charges recognized in the period, partially
offset by a decrease in operating expenses related to
reimbursements and tax credits under government programs in several
countries where we have operations, including the Coronavirus Aid,
Relief, and Economic Security Act ("CARES Act") in the U.S., the
Kurzarbeit program in Germany, and
other programs in the U.K., France, Canada and other jurisdictions.
For the fourth quarter of 2020, our effective income tax rate
decreased period-over-period to 25.0% from 26.1%.
Full Year
Net income - Omnicom Group Inc. for the twelve months ended
December 31, 2020 decreased $393.7
million to $945.4 million
compared to $1,339.1 million in the
same period in 2019. Diluted net income per share - Omnicom
Group Inc. for the twelve months ended December 31, 2020
decreased $1.69 to $4.37 per share compared to $6.06 per share for the twelve months ended
December 31, 2019.
Net income - Omnicom Group Inc. for the twelve months ended
December 31, 2020 includes a net after-tax decrease of
$146.8 million as a result of
COVID-19 repositioning costs and a net loss on dispositions during
the second quarter of 2020, asset impairment charges recorded
during the fourth quarter of 2020, and credits related to
reimbursements and tax credits under government programs in several
countries where we have operations, as discussed further below.
Primarily due to the negative effects on our revenue
attributable to the COVID-19 pandemic in the second through fourth
quarters of 2020, worldwide revenue for the twelve months ended
December 31, 2020 decreased 11.9% to $13,171.1 million from $14,953.7 million in the same period of
2019. The components of the change in revenue included a
decrease in revenue from the negative impact of foreign currency
translation of 0.4%, a decrease in acquisition revenue, net of
disposition revenue of 0.4% and a decrease in revenue from negative
organic growth of 11.1% when compared to the same period of
2019.
Organic growth for the twelve months ended December 31,
2020 compared to the same period in 2019 in our five fundamental
disciplines was as follows: Advertising decreased 12.2%, CRM
Consumer Experience decreased 15.8%, CRM Execution & Support
decreased 15.1%, Public Relations decreased 4.2% and Healthcare
increased 3.3%.
Across all of our regional markets, organic growth was negative
for the twelve months ended December 31, 2020 as compared to
the same period of 2019. The decreases were as follows:
the United States 10.1%, Other
North America 10.0%, the United
Kingdom 11.5%, the Euro Markets & Other Europe 12.8%,
Asia Pacific 8.5%, Latin America 15.1% and the Middle East & Africa 32.3%.
Operating profit decreased $523.5
million, or 24.7%, to $1,598.8
million from $2,122.3 million
for the twelve months ended December 31, 2019. Our operating
margin for the twelve months ended December 31, 2020 decreased
to 12.1% versus 14.2% for the same period of 2019.
Operating profit for the twelve months ended December 31,
2020 includes a net decrease aggregating $171.1 million due to COVID-19 repositioning
costs recorded during the second quarter of 2020, comprised of
incremental severance charges, right-of-use asset impairments and
other real estate costs of $252.8
million, and a net loss on the disposition of certain
subsidiaries and other charges of $25.1
million, and asset impairment charges recorded during the
fourth quarter of 2020 of $55.8
million, partially offset by reimbursements and tax credits
under government programs in several countries where we have
operations, including the CARES Act in the U.S., the Kurzarbeit
program in Germany, and other
programs in the U.K., France,
Canada and other jurisdictions,
which reduced salary and service costs by $162.6 million.
Our effective tax rate for the twelve months ended
December 31, 2020 increased period-over-period to 27.1% from
26.0%. The non-deductibility in certain jurisdictions of a portion
of the COVID-19 repositioning costs recorded in the second quarter
of 2020 had the effect of increasing our effective tax rate for the
twelve months ended December 31, 2020. This increase was
substantially offset by a lower effective tax rate on our foreign
earnings resulting from a change in legislation. In 2019, income
tax expense was reduced by $10.8
million primarily from the net favorable settlements of
uncertain tax positions in certain jurisdictions. After
considering these items, our effective tax rate for the twelve
months ended December 31, 2020 would have approximated the
rate for 2019.
COVID-19 Business Update
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 through the remainder of 2020 and is expected to continue
through the first half of 2021. 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
significantly than others, including travel, lodging and
entertainment, energy and oil and gas, non-essential retail and
automotive. Clients in these industries have 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 COVID-19 repositioning actions were taken to
tailor their services and capabilities to changes in client
demand.
As we previously reported, during the first half of 2020, we
took numerous proactive steps to strengthen our 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, 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.
Definitions - Components of Revenue Change
We use certain terms in describing the components of the change
in revenue above.
Foreign exchange rate impact: calculated by translating the
current period's local currency revenue using the prior period
average exchange rates to derive current period constant currency
revenue. The foreign exchange rate impact is the difference between
the current period revenue in U.S. Dollars and the current period
constant currency revenue.
Acquisition revenue, net of disposition revenue: Acquisition
revenue is calculated as if the acquisition occurred twelve months
prior to the acquisition date by aggregating the comparable prior
period revenue of acquisitions through the acquisition date. As a
result, acquisition revenue excludes the positive or negative
difference between our current period revenue subsequent to the
acquisition date and the comparable prior period revenue and the
positive or negative growth after the acquisition date is
attributed to organic growth. Disposition revenue is calculated as
if the disposition occurred twelve months prior to the disposition
date by aggregating the comparable prior period revenue of
disposals through the disposition date. The acquisition revenue and
disposition revenue amounts are netted in the description
above.
Organic growth: calculated by subtracting the foreign exchange
rate impact component and the acquisition revenue, net of
disposition revenue component from total revenue growth.
Forward-looking Statements
Certain statements in this press release related to the
potential impact of the COVID-19 outbreak constitute
forward-looking statements, including statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements may discuss goals, intentions and expectations as to
future plans, trends, events, results of operations or financial
condition, or otherwise, based on current beliefs of the Company's
management as well as assumptions made by, and information
currently available to, the Company's management. Forward-looking
statements may be accompanied by words such as "aim," "anticipate,"
"believe," "plan," "could," "should," "would," "estimate,"
"expect," "forecast," "future," "guidance," "intend," "may,"
"will," "possible," "potential," "predict," "project" or similar
words, phrases or expressions.
Forward-looking statements are subject to various risks and
uncertainties, many of which are outside the Company's control.
Therefore, you should not place undue reliance on such statements.
You should carefully consider this and the other risks and
uncertainties that may affect the Company's business, including
those described in Item 1A, "Risk Factors" and Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our most recent Annual Report on Form
10-K and other documents filed from time to time with the
Securities and Exchange Commission. Except as required under
applicable law, the Company does not assume any obligation to
update these forward-looking statements.
Conference Call
Omnicom will host a conference call to review the fourth quarter
and full year 2020 financial results on Thursday, February 18,
2021 at 8:30 a.m. ET. Participants
can listen to the conference call by dialing (877) 336-4440
(domestic) or (409) 207-6984 (international), along with access
code 5410296. The call will also be simulcast and archived on our
website at:
http://investor.omnicomgroup.com/investor-relations/news-events-and-filings.
About Omnicom Group Inc.
Omnicom Group Inc. (NYSE: OMC) (www.omnicomgroup.com) is a
leading global marketing and corporate communications
company. Omnicom's branded networks and numerous specialty
firms provide advertising, strategic media planning and buying,
digital and interactive marketing, direct and promotional
marketing, public relations and other specialty communications
services to over 5,000 clients in more than 70 countries.
Follow us on Twitter for the latest news.
Omnicom Group
Inc. Consolidated Statements of Income Three
Months Ended December 31
(Unaudited)
(Dollars in Millions, Except Per Share Data)
|
|
|
2020
(a)
|
|
2019
|
|
|
|
|
Revenue
|
$
|
3,757.0
|
|
|
$
|
4,141.2
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
2,721.2
|
|
|
3,034.7
|
|
Occupancy and other
costs
|
265.9
|
|
|
306.4
|
|
Costs of
services
|
2,987.1
|
|
|
3,341.1
|
|
Selling, general and
administrative expenses
|
101.4
|
|
|
97.5
|
|
Depreciation and
amortization
|
53.8
|
|
|
56.2
|
|
|
3,142.3
|
|
|
3,494.8
|
|
Operating
Profit
|
614.7
|
|
|
646.4
|
|
Interest
Expense
|
55.3
|
|
|
52.0
|
|
Interest
Income
|
7.3
|
|
|
13.4
|
|
Income Before Income
Taxes
|
566.7
|
|
|
607.8
|
|
Income Tax
Expense
|
141.5
|
|
|
158.8
|
|
Income From Equity
Method Investments
|
3.3
|
|
|
0.8
|
|
Net Income
|
428.5
|
|
|
449.8
|
|
Net Income Attributed
To Noncontrolling Interests
|
30.4
|
|
|
34.8
|
|
Net Income - Omnicom
Group Inc.
|
$
|
398.1
|
|
|
$
|
415.0
|
|
|
|
|
|
Net Income Per Share
- Omnicom Group Inc.
|
|
|
|
Basic
|
$
|
1.85
|
|
|
$
|
1.90
|
|
Diluted
|
$
|
1.84
|
|
|
$
|
1.89
|
|
|
|
|
|
Weighted average
shares (in millions)
|
|
|
|
Basic
|
215.5
|
|
|
218.2
|
|
Diluted
|
216.1
|
|
|
219.3
|
|
|
|
|
|
Dividends Declared
Per Common Share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
|
(a)
|
Salary and service
costs for the fourth quarter of 2020 includes asset impairment
charges recognized in the period, partially offset by a decrease in
operating
expenses related to reimbursements and tax credits under government
programs in several countries where we have operations, including
the CARES Act in
the U.S., the Kurzarbeit program in Germany, and other programs in
the U.K., France, Canada and other jurisdictions. The net aggregate
impact of these items
increased salary and related service costs and decreased Operating
Profit by $11.1 million and Net Income - Omnicom Group Inc. by
$13.0 million for the three
months ended December 31, 2020.
|
Omnicom Group
Inc. Consolidated Statements of Income Twelve
Months Ended
December 31 (Unaudited)
(Dollars in Millions, Except Per Share Data)
|
|
|
2020 (a)
(b)
|
|
2019
|
|
|
|
|
Revenue
|
$
|
13,171.1
|
|
|
$
|
14,953.7
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
9,572.8
|
|
|
10,972.2
|
|
Occupancy and other
costs
|
1,138.5
|
|
|
1,221.8
|
|
COVID-19 repositioning
costs
|
277.9
|
|
|
—
|
|
Costs of
services
|
10,989.2
|
|
|
12,194.0
|
|
Selling, general and
administrative expenses
|
360.5
|
|
|
405.9
|
|
Depreciation and
amortization
|
222.6
|
|
|
231.5
|
|
|
11,572.3
|
|
|
12,831.4
|
|
Operating
Profit
|
1,598.8
|
|
|
2,122.3
|
|
Interest
Expense
|
221.8
|
|
|
244.3
|
|
Interest
Income
|
32.3
|
|
|
60.3
|
|
Income Before Income
Taxes
|
1,409.3
|
|
|
1,938.3
|
|
Income Tax
Expense
|
381.7
|
|
|
504.4
|
|
Income (Loss) From
Equity Method Investments
|
(6.8)
|
|
|
2.0
|
|
Net Income
|
1,020.8
|
|
|
1,435.9
|
|
Net Income Attributed
To Noncontrolling Interests
|
75.4
|
|
|
96.8
|
|
Net Income - Omnicom
Group Inc.
|
$
|
945.4
|
|
|
$
|
1,339.1
|
|
|
|
|
|
Net Income Per Share
- Omnicom Group Inc.
|
|
|
|
Basic
|
$
|
4.38
|
|
|
$
|
6.09
|
|
Diluted
|
$
|
4.37
|
|
|
$
|
6.06
|
|
|
|
|
|
Weighted average
shares (in millions)
|
|
|
|
Basic
|
215.6
|
|
|
219.8
|
|
Diluted
|
216.2
|
|
|
220.9
|
|
|
|
|
|
Dividends Declared
Per Common Share
|
$
|
2.60
|
|
|
$
|
2.60
|
|
|
|
(a)
|
During the second
quarter of 2020, we recorded expenses for certain repositioning
actions related to the realignment of our businesses in reaction to
the COVID-19
pandemic and recorded a net loss on the disposition of certain
subsidiaries. The impact of these items decreased Operating Profit
by $277.9 million and Net Income -
Omnicom Group Inc. by $223.1 million for the twelve months ended
December 31, 2020.
|
(b)
|
Salary and service
costs includes the reduction in operating expenses related to
reimbursements and tax credits under government programs in several
countries
where we have operations, including the CARES Act in the U.S., the
Kurzarbeit program in Germany, and other programs in the U.K.,
France, Canada and other
jurisdictions, partially offset by the impact of asset impairment
charges recorded during the fourth quarter of 2020. The impact of
these items reduced salary and
related service costs and increased Operating Profit by $106.8
million and Net Income - Omnicom Group Inc. by $76.3 million for
the twelve months ended December 31, 2020.
|
Omnicom Group
Inc. Detail of Operating Expenses Three Months
Ended December 31
(Unaudited)
(Dollars in Millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
|
|
|
Salary and related
service costs
|
$
|
1,682.6
|
|
|
$
|
1,844.6
|
|
Third-party service
costs
|
1,038.6
|
|
|
1,190.1
|
|
Occupancy and other
costs
|
265.9
|
|
|
306.4
|
|
Costs of
services
|
2,987.1
|
|
|
3,341.1
|
|
Selling, general and
administrative expenses
|
101.4
|
|
|
97.5
|
|
Depreciation and
amortization
|
53.8
|
|
|
56.2
|
|
Total Operating
Expenses
|
$
|
3,142.3
|
|
|
$
|
3,494.8
|
|
Omnicom Group
Inc. Detail of Operating Expenses Twelve Months
Ended December 31
(Unaudited)
(Dollars in Millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
|
|
|
Salary and related
service costs
|
$
|
6,250.9
|
|
|
$
|
6,895.2
|
|
Third-party service
costs
|
3,321.9
|
|
|
4,077.0
|
|
Occupancy and other
costs
|
1,138.5
|
|
|
1,221.8
|
|
COVID-19 repositioning
costs
|
277.9
|
|
|
—
|
|
Costs of
services
|
10,989.2
|
|
|
12,194.0
|
|
Selling, general and
administrative expenses
|
360.5
|
|
|
405.9
|
|
Depreciation and
amortization
|
222.6
|
|
|
231.5
|
|
Total Operating
Expenses
|
$
|
11,572.3
|
|
|
$
|
12,831.4
|
|
Omnicom Group
Inc. Impact of Government Wage Programs and Asset
Impairments Three Months Ended December 31,
2020 (Unaudited)
(Dollars in Millions)
|
|
|
Three Months ended
December 31, 2020
|
|
Gov't Wage
Programs
|
Asset
Impairments and
Other
|
|
Total
|
|
|
|
|
|
Operating Expenses
(a) (b):
|
|
|
|
|
Salary and service
costs
|
|
|
|
|
Salary and related
service costs
|
$
|
(44.7)
|
|
$
|
55.8
|
|
|
$
|
11.1
|
|
Third-party
costs
|
—
|
|
—
|
|
|
—
|
|
Occupancy and other
costs
|
—
|
|
—
|
|
|
—
|
|
Costs of
services
|
(44.7)
|
|
55.8
|
|
|
11.1
|
|
Selling, general and
administrative expenses
|
—
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
—
|
|
—
|
|
|
—
|
|
Operating
Expenses
|
$
|
(44.7)
|
|
$
|
55.8
|
|
|
$
|
11.1
|
|
|
|
|
|
|
|
|
(a)
|
The above table
identifies the pre-tax impact of asset impairment charges recorded
in the fourth quarter of 2020, which increased salary and related
service costs
and decreased operating profit by $55.8 million for the three
months ended December 31, 2020.
|
(b)
|
Additionally, salary
and related service costs for the fourth quarter of 2020 includes
the reduction in operating expenses related to reimbursements and
tax credits
under government programs in several countries where we have
operations. The impact of these items reduced salary and
related service costs and increased
operating profit by $44.7 million for the three months ended
December 31, 2020.
|
Omnicom Group
Inc. Impact of COVID-19 Repositioning Costs, Government
Wage Programs and Asset Impairments Twelve Months Ended
December 31,
2020 (Unaudited)
(Dollars in Millions)
|
|
|
Twelve Months
ended December 31, 2020
|
|
Severance
Actions
|
Real Estate
Actions
|
Gov't Wage
Programs
|
Asset
Impairments
and Other
|
|
Total
|
|
|
|
|
|
|
|
Operating Expenses
(a) (b) (c):
|
|
|
|
|
|
|
Salary and service
costs
|
|
|
|
|
|
|
Salary and related
service costs
|
$
|
—
|
|
$
|
—
|
|
$
|
(162.6)
|
|
$
|
55.8
|
|
|
$
|
(106.8)
|
|
Third-party
costs
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Occupancy and other
costs
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
COVID-19 repositioning
costs
|
150.0
|
|
102.8
|
|
—
|
|
25.1
|
|
|
277.9
|
|
Costs of
services
|
150.0
|
|
102.8
|
|
(162.6)
|
|
80.9
|
|
|
171.1
|
|
Selling, general and
administrative expenses
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Operating
Expenses
|
$
|
150.0
|
|
$
|
102.8
|
|
$
|
(162.6)
|
|
$
|
80.9
|
|
|
$
|
171.1
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The above table
identifies the pre-tax impact of certain repositioning actions
related to the realignment of our businesses in reaction to the
COVID-19 pandemic
and recorded a net loss on the disposition of certain subsidiaries
of $277.9 million for the twelve months ended December 31,
2020.
|
(b)
|
Salary and related
service costs for the twelve months ended December 31, 2020
includes the reduction in operating expenses related to
reimbursements
and tax credits under government programs in several countries
where we have operations. The impact of these items reduced
salary and related service costs
and increased operating profit by $162.6 million for the twelve
months ended December 31, 2020.
|
(c)
|
Salary and related
service costs for the twelve months ended December 31, 2020
includes asset impairment charges recorded in the fourth quarter of
2020,
which increased salary and related service costs and decreased
Operating Profit by $55.8 million for the twelve months ended
December 31, 2020.
|
View original
content:http://www.prnewswire.com/news-releases/omnicom-group-reports-fourth-quarter-and-full-year-2020-results-301230540.html
SOURCE Omnicom Group Inc.