Publicis: 13% Rev Rise, Trad Media Dips

Maurice-LevyPublicis Groupe reported a nearly 13% spurt in revenues to $1.9 billion for the first quarter of 2012 compared to the same period a year ago.

Organic growth, which excludes acquisitions and currency fluctuations, was lower and climbed 4.1%. On a call with analysts to discuss results, Publicis CEO Maurice Levy suggested, without providing formal guidance, that the holding company’s organic growth for the year would be approximately 4.2%. “That’s roughly where you should be,” he told analysts trying to calculate the company’s full-year performance.

By comparison, competitor Omnicom reported earlier in the week that its revenues grew 5% in the quarter to $3.3 billion, with organic growth of 5.1%.

Like Omnicom, Publicis acknowledged that the health-care sector was a drag on growth. Levy noted that a number of drug patents are expiring this year. When that happens, marketers tend to curtail spending as generic products hit the market.



Levy also acknowledged a “sharp decrease in analog spending in the beginning of the year.” As a result, traditional media revenues accounted for 17% of the company’s overall revenue in the quarter, versus 19% a year ago.

On the flip side, digital revenues now account for one-third of the company’s overall revenue pie, up from 28% a year ago. Levy said digital growth was one of two key “pillars” of future growth for the holding company, with the other being expansion into fast-growing markets like China, where Publicis posted nearly 40% growth in the quarter and organic growth of 15%. The company’s “medium term” objective is to derive 75% of its revenues from digital and emerging markets.

Revenues in North America grew nearly 15%, with organic growth of just over 3%, while growth in Europe was nearly 5% with organic growth of 4%. Growth in the so-called BRIC and MISSAT countries (Brazil, Russia, India, China; Mexico, Indonesia, Singapore, South Africa and Turkey) soared more than 31% with organic growth of 10%.

But the company’s performance will get worse before it gets better, as Levy confirmed on the call. He is expecting a “deceleration” in the second quarter. However, the expectation is a rebound in the second half,  expected to be better than the first, due in part to special events like the Olympics and European soccer championship games.

Also contributing to a better second half for the company will be two “major car launches,” including the electric car Zoe from Renault, notes Levy. In addition, several acquisitions that the company made in the second half of 2011 will start generating revenue growth beginning in the third quarter of this year.

Net new business for the quarter was $811 million, including new assignments from Samsung, Avis and Kraft Foods. Levy described Q1 new business activity as “not as buoyant” as a year ago. The company excluded the loss of the $2.1 billion General Motors U.S. media assignment, which the automaker decided in January to globally consolidate with Carat. But the loss didn’t start impacting Publicis Groupe until the second quarter, per Levy.

While Levy said he “feels good” about first-quarter results and is also reasonably optimistic about the remainder of the year, the sovereign debt crisis in Europe remains “a little bit worrying. It is a cloud in the sky that is not absolutely shining.”

He did says that Publicis will end 2012 with organic growth “above the market and our peer group,” referring to WPP, Omnicom and Interpublic Group.

But Levy also told analysts not to expect much profit margin improvement from the company in the near future.  That’s because it will be investing in technology to create platforms and products “badly needed” by clients “that will help us generate different kinds of revenues.” He declined to elaborate.

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