Interpublic shows continued decline in Q2 ahead of Omnicom merger – The Media Leader

Omnicom reported organic growth of 3% in Q2, on revenue of $4bn, showing a stronger performance than upcoming new partner Interpublic, which posted organic decline of 3.5%, on net revenue of $2.2bn.

In Q1, Omnicom had organic growth of 3.4%, signalling a slight slowdown in growth in Q2. Interpublic’s Q1 was flat in comparison with Q2. Omnicom’s figures are based on gross revenue as opposed to net revenue, as Interpublic’s results (along with that of other major holding groups).

Omnicom is set to complete its merger with Interpublic in the second half of the year, provided it secures antitrust clearance in all jurisdictions required.

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Weak UK performances

For Omnicom, the media and advertising segment grew 8.2% in Q2 — something that vice-president and chief financial officer Philip Angelastro attributed to strong growth in media amid a mixed performance from the advertising segment.

Interpublic’s media, data and engagement segment declined 3.1% in the same period. That said, integrated advertising fell even more considerably (-6.3%).

By geography, in their home market of the US, while Omnicom managed to generate 3% growth, Interpublic fell 2.6%.

In the UK, both companies declined. Interpublic dropped 9.7% and Omnicom fell a less marked 2.5%, with Angelastro pointing to other disciplines offsetting the strength of media and advertising in that market.

Wider market position

As a comparison, rival Publicis Groupe posted organic growth of 5.9% in the same quarter and upped its full-year target to close to 5%, highlighting its strength in the market.

Analyst Ian Whittaker highlighted Publicis’ “widening gap” in the market — something that is looking “increasingly structural in nature”.

Meanwhile, WPP issued a profit warning earlier this month projecting revenue to decline between 3% and 5% this year, noting a “below-expectations decline” of 5.5-6% in Q2.

Outgoing CEO Mark Read highlighted “a challenging trading environment with macro pressures intensifying and lower net new business”.

This was echoed by Interpublic CEO Philippe Krakowsky, who said growth is “being pressured by the impact of account activity that concluded in 2024” and that the wider macro environment has been “more volatile than anticipated as we entered the year”.

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Looking ahead to merger completion

Despite the lacklustre performance, Krakowsky remained positive about the upcoming merger with Omnicom, revealing during the earnings call that the deal has now secured antitrust clearance in 13 out of 18 jurisdictions, including from the US Federal Trade Commission in June. This means the merger is on track to complete in the second half of the year.

Highlighting the spread of talent and complementary capabilities, Krakowsky said: “The level of interest and support from clients continues to be extremely strong and there’s eagerness on the part of practitioners across both organisations to unlock the value that the combination will create.”

John Wren, CEO of Omnicom, also signalled enthusiasm on his earnings call, noting: “There is a genuine sense of anticipation and excitement about the opportunities our combined company will create that has only intensified as we approach the closing.”

Ahead of the merger, both companies have been restructuring their operations. In the results, Interpublic noted restructuring charges of $118m and $11m in transaction costs related to the deal.

Repositioning costs for Omnicom in Q2 reached $88.8m — primarily for severance and efficiency initiatives. For Omnicom, these costs contributed to a 3.9 percentage point decrease in operating margin along with acquisition costs.

Additionally, Omnicom cut an estimated 3,000 roles throughout 2024 in anticipation of the merger.

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