Publicis Groupe Posts 'Clearly Disappointing' 0.7% 3Q Organic Growth

Publicis Groupe continues to lag behind its peers in organic growth for 2015. Today the company reported just 0.7% organic growth (which excludes the impact of currency fluctuations, acquisitions and asset sales) for the third quarter and 1% for the first nine months.

By comparison, Omnicom posted growth of 6.1% for Q3 and 5.5% for the first nine months. The comparable figures for IPG, reported yesterday, were 7.1% and 6.5% respectively.

"Clearly disappointing news," CEO Maurice Levy told analysts on a conference call Thursday morning. “Growth reported in September was nil due to an unusually large number of clients downsizing accounts and postponing or even canceling campaigns."

"However you look at the numbers as far as your competitors who are having a growth higher than you, the first lesson you learn in marketing is that you are losing market share. It is clearly something we have to face," says Levy.

Publicis Groupe’s consolidated revenue for the third quarter was 2.325 billion euro, or about $2.6 billion at today’s exchange rates, up 33% from 1.748 billion euro ($1.98 billion) from Q3 2014. "We are still reporting a sharp rise in revenue of almost 35% for the first nine months of the year. After excluding the impact of exchange rates, revenue growth still stands at 20%," Levy says. Acquisitions, including Sapient accounted for most of that increase.

Although Levy describes this as a "gloomy environment," there is good news for the holding company. "The experience we are getting with Sapient is going very well," says Levy. Sapient growth stands at 5% and digital now accounts for the majority of Publicis revenue (51.5%) during the first nine months of 2015, up from 41.6% year-over-year. "Digital is transforming the industry and advertisers' business models," says Levy. "It is the beginning of a new era."

In light of this revolution, Publicis is turning its focus to new opportunities, particularly with artificial intelligence. "Maybe we are not intelligent enough that we need to turn to artificial ones," jokes Levy. "We are the only one building for the future." The group just announced a minority stake in AI leader Lucid that will enable Publicis to have "unique positioning combining creativity and technology, in an integrated organization."

"Advertisers are increasingly demanding in terms of criteria on innovation, relevance of targets and integration, enabling them to utilize the Groupe’s entire array of assets to their best advantage. And this is what is at stake in our strategy," says Levy. "Using data compiled on individual behavior over decades, it is now possible to avail more relevant and operational predictive models in the business than with traditional market research." In a world dominated by data market research is almost outdated.

Publicis is emerging strong after "mediapoolza." More than half of the big media reviews have been completed according to the holding company’s calculations, and Publicis has been able to add new business "thanks to our business capabilities" including Citibank, Coty, Kraft Heinz, Sears, Taco Bell, and Visa, although it did lose a big chunk of Coca-Cola business and is defending its North American Procter & Gamble media assignment. The company is also participating in reviews by 21st Century Fox and L’Oreal, Levy confirmed. "I am absolutely certain our team will fight hard." Others ongoing include Unilever, Sony, and Volkswagen.

Europe, Africa, and the Middle posted modest growth and the Asia-Pacific region is showing signs of recovery. Brazil, Canada, Italy, Mexico, Russia, and Turkey struggled. Business is still difficult in the UK as Publicis Worldwide UK has had a new management team in place for few months only, with revenue falling 5.1% in Q3 2015

"The big surprise is the lack of growth in the U.S. which happened because of client cutbacks and postponed campaigns." says Levy. It isn't that we lost any significant clients just that their internal decisions impacted our margins, he says, adding these challenges came primarily from automotive and pharma advertisers.

The Groupe’s net financial debt stood at 3,111 million euro ($3.5 billion), versus a net financial debt of 93 million euro ($105 million) at September 30, 2014, due in large part to the Sapient acquisition.



Full year-organic growth is expected to be around 1%

"We are remaining cautious about Q4 because it is always difficult to predict and this year more than ever," says Levy. "The quarter is always a variable for clients. When they are having good numbers, they are putting more money [into campaigns] and when they are having bad [times], they are cutting their investment. And also we don't see any progress coming from Latin America. We think the situation in Brazil will last through 2016 and my feeling is that the Olympic Games will not bring as much as they normally due."

Next story loading loading..