Publicis: Revs Up, Aggressive M&A Continues

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Publicis Groupe, the Paris-based ad agency holding company, on Thursday reported an 8.5% rise in net income to $328 million for the first half of the year on a 6.3% gain in revenue to $3.8 billion.

The company recorded $2.4 billion in net new business wins worldwide during the first six months, including new awards by Microsoft and Disney to Starcom MediaVest Group and an assignment by JP MorganChase to ZenithOptimedia, among a number of others.

Revenue growth in the second quarter dipped to 2.7%, for a total of $2 billion, which the company blamed on the negative impact of exchange rates. It also noted what it called a "temporary slowdown" in global economic growth during the second quarter but stressed that for now, full-year economic forecasts remain unchanged.

Organic revenue growth (exclusive of acquisitions and divestitures) for the first six months of the year was 7.1%.

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Commenting on the results in a statement, Publicis Groupe CEO Maurice Levy characterized the company's organic growth so far this year as "excellent...This confirms the validity of our strategic choices."

In a webcast addressing the first half, Levy also touched on succession plans, which he said were proceeding apace. In June the company raised the mandatory retirement age limit from 70 to 75 for executive officers and members of the board. Levy is 69, and will now have more time to search for his successor. He earlier confirmed he would stay beyond the end of 2011, when he initially planned to retire.

In the webcast, he indicated that he had told the board that he would stay "as long as you need me," which is presumably through a transition period after a successor has been named. Levy has indicated there would be multiple candidates -- chief operating officer Jean Yves Naouri is seen as one.

Organic growth aside, Levy noted that the company made a number of acquisitions in the first half -- notably digital shop Rosetta and social media agency Big Fuel. He suggested that the aggressive pursuit of acquisitions would continue, "and they will be key elements for the growth of our networks."

But going forward, Levy also stressed that talent would be a "priority ...particularly after two years of a salary and hiring freeze."

Latin America was the fastest-growing region by revenue growth in the first half, albeit from a relatively low base. The region posted a nearly 25% gain to $223 million. North America, the biggest region by total dollars, had the smallest growth -- up 1.1% to nearly $1.84 billion. Europe was up 11% to nearly $1.3 billion, and the Asia-Pacific region was up 7% to $436 million.

The company noted that organic revenue growth in the U.S. reached just over 7%, driven by "solid media growth and the sizable contribution of the health care sector."

The company stressed it would continue to focus on its strategy of expanding in high-growth countries, with a particular emphasis on China and Brazil, while continuing to bulk up its digital resources. 

Digital now accounts for 29% of the company's total revenue, up from 28.1% in 2010, while traditional media accounts for 20% -- the same as last year. Creative advertising revenue accounted for 31% (down from 33% last year) and various diversified services accounted for the rest. 

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