When asked by an analyst about "severance" (that's a Wall Street euphemism for layoffs) Wren said there was more to come:
Alexia Quadrani -- JPMorgan: And with regard to severance should we assume it will be a little bit more modest in Q3?So far, Omnicom agencies have laid off more than 3,500 employees, with agencies such as BBDO and TBWA taking the brunt. Ad agency folk might find themselves relatively protected this time round. Agencies are the part of Omnicom's business that is declining the least, Omnicom reported:
John Wren: Yes. Most of our actions at this point given the level of business have been taken. There is some anticipated severance in the third quarter. And we believe that we have done a very good job of identifying those areas where we can take action. So you should see a far more modest than the third quarter. And hopefully then we are close to done.
- Sector, % decline
- Ad agencies: 15.5%
- PR: 18.5%
- CRM: 18.7%
- Specialty: 20.1%
Also, those layoffs have worked: Omnicom's revenue yield on its operating expenses ticked up considerably this quarter, an indicator that layoffs need not be dramatic.
Cashflow problems continue It was another rough quarter in terms of cashflow. (BNET first noted Omnicom's cashflow difficulties in February.) The company lost $697.4 million this quarter. In Q1, it lost $685 million. In Q4 it lost nearly $700 million.
Much of that was a $478 million in working capital losses -- that tells us Omnicom's still having difficulty collecting its bills on time and delaying payments to vendors as long as possible. Weisenberger admitted there had been some "pressure":
Our overall working capital performance has been extremely good. I mentioned last quarter we have experienced considerable added working capital pressure due to the overall economic environment and credit environment.
However, in response, we have redoubled our own efforts. I am happy to say that due to the considerable efforts on the part of our agencies globally we have more than held our ground to-date and our bad debt losses have been minimal.
- See previous coverage:
- BBDO Staff Forced to Take Unpaid Vacation; Latest in a Series of Omnicom's Cashflow Maneuvers
- Omnicom Drops Bonuses for Top Execs Who Get Fired; Another Example of Lax Board Oversight
- BBDO Backs Off "Sequential Liability" for Media Outlets
- Omnicom's Top Execs Saw Pay Slashed to Save Bonuses for Underlings
- Omnicom Q1: CFO Weisenberger Hints at More Layoffs to Come
- Omnicom Delaying Payments to Photographers, Too
- Omnicom, in Cash Crunch, to Delay Payments to U.S. TV Producers
- Omnicom Sought to Delay TV Production Payments; a Sign of Cash Crisis?
- Clients Are Delaying Payments to Agencies
- Omnicom, Publicis Worst Hit in Auto Brand Axings
- Omnicom's Credit Crunch: a Gamble by CEO Wren That Didn't Pay Off
- Omnicom Q4: Slashing Jobs Faster Than Revenues Shrink Seems to Work
- Omnicom's John Wren Got $25 Mil. Stock Bonus Days After 3,500 Layoffs