For the major global groups like Publicis and Omnicom it must be very frustrating to see revenues and profits fluctuating so wildly as a consequence of foreign currency exchange rate movements.
Last week Omnicom’s half year revenues and profits showed impressive growth, but a large proportion of it was due to the declining value of the dollar. Revenues from overseas were boosted by some $205 million as a result. That’s the advantage of having a global business when your domestic currency is weak.
By contrast Publicis had to suffer the consequences of the weaker dollar knocking some $80 million off the revenues it would otherwise have enjoyed.
To help people understand the currency impact on revenues, most companies also publish “constant currency” figures. These showed that Publicis would have enjoyed a bigger revenue growth rate than Omnicom achieved if currency movements had not occurred. That may be a fact, but far more important is the fact that exchange rate movements are real. So actual, rather than notional, revenues and profits are what really matter to shareholders.
It will be interesting to see how the declining dollar has affected WPP.
Bob Willott is editor of “Marketing Services Financial Intelligence” at www.fintellect.com