Omnicom reported full-year results Tuesday morning and indicated that foreign exchange rates continued to impact the company’s revenue growth throughout 2016 while field marketing, branding and research businesses dragged down U.S. results.
The company reported a 1.9% gain in 2016 revenue to just over $15.4 billion with an increase of 2.1% in the fourth quarter to a little more than $4.2 billion. In the fourth quarter alone, the foreign exchange impact reduced revenues by $75 million.
And Omnicom executives told analysts on a conference call that FX issues will likely continue to impact results in 2017, but cautioned that it’s very difficult to forecast what that impact will be -- and this will depend to an extent on foreign trade policy changes put into place by the Trump administration.
But company CEO John Wren said he had “no clue” at this point how the administration would impact trade policy. “I can’t figure it out,” he said, speaking more broadly of the U.S. government, and adding that an “animal spirit has been released in the U.S.”
Overall, Wren said he was “very pleased” with the group’s performance in 2016, when the company reached its organic revenue growth target of 3.5% (and 3.6% in Q4) and surpassed its target for profit margin expansion.
In North America, organic growth was 0.6% in the fourth quarter and 2.4% for the full year. Wren indicated that the company would likely divest of some field marketing companies (which for example, work with big-box outlets and other retailers to optimize in-store displays, signage and the like) which he described as “non-strategic.” The branding businesses, he added, hit a “speed bump” and are very project-focused, which can often result in delayed work and resulting revenue slowdowns.
While North America results were tepid, performance in other regions was significantly stronger. Full-year organic growth in the UK was 4.9% and 4% in continental Europe.
Growth in the Asia-Pacific region was 6.8%, and 11.7% in the Middle East and Africa. Latin America posted a slight decline (0.8%) largely as a result of political and economic turmoil in Brazil, which was offset in large part to a strong performance in Mexico.