Publicis Groupe is "stronger than it was a year ago," according to chairman and chief executive officer Arthur Sadoun. Organic growth (which strips out M&A and currency fluctuations) was up 2.2% in the fourth quarter of 2017, the third consecutive quarter of improved growth during the year, which started with an organic revenue decline of -1.2% in the first quarter.
The ensuing growth was partly due to account wins including Synergy Pharmaceuticals, Walmart, USAA, Asda, Motorola and Lowe’s.
Nonetheless, the Groupe’s consolidated revenue in fourth-quarter 2017 was 2.583 billion euro (approximately $3.16 billion), down 3.1% from the prior-year period.
For the full year, organic growth was up 0.8%, while consolidated revenue was down 0.4% to 9.69 billion euro ($11.85 billion).
Middle Each/Africa and Latin America were the strongest performers in 2017, with organic growth up 4.8% and 4.4%, respectively. Europe saw organic growth up 1.3%, North America was up 0.5% and Asia Pacific's organic growth dropped 1.5%.
Restructuring costs rose to $147 million in 2017 -- from $89 million in 2016 -- as the Groupe reorganized around "The Power of One."
While asserting that the industry is experiencing a fundamental upheaval, "we delivered against our expectations and accelerated transformation," says Sadoun. "Disruption is the trademark of Publicis."
Still, Sadoun admits the company needs to further demonstrate the "singularity of its business model and why it is ideally positioned to partner with clients."
The Groupe continues to battle back
against an anonymous letter sent to investors that alleges Publicis had prematurely
applied accounting standard IFRS 15 on revenue recognition in order to artificially boost its organic growth.
The author’s intent is clearly to harm Publicis Groupe, says Jean-Michel Etienne, executive vice president and group CFO, Publicis Groupe. "This is totally wrong. We formally denied the allegations," after doing a thorough analysis of the numbers. The Groupe immediately notified French market authority AMF.
As previously reported the Groupe has undertaken a company-wide restructuring with the aim of strengthening its assets in technology, data and its talent pool, in order to best position the Groupe for the future. "While the objectives set in 2013 need to be revisited, short term trends are encouraging," says Sadoun.
In 2018 the Groupe should post a higher organic growth than in 2017, per the company. The first quarter should be positive, with a "noticeable upswing" from last year’s decline.
This growth will be led by another round of industry-wide client reviews that the firm believes it is well positioned to capitalize on. Publicis Media CEO Steve King believes the industry is entering another “Mediapalooza” review period with Publicis well-positioned to land several of these account reviews.
Commenting on the results, Pivotal senior research analyst Brian Wieser stated in an investor note that, "The agency sector continues to face a wide range of challenges, most of which are surmountable. These include the difficulties facing core agency customers’ businesses, like-for-like fee compression, maturation of digital media, in-housing of some creative and media functions and heightened contractual scrutiny in the wake of last year’s reports on fee transparency. However, we continue to believe that the industry is durable, and that Publicis in particular is well-positioned over the long-run within it. Integration between Sapient and other parts of Publicis is still a work-in-progress, but also expect that benefits will be realized over time, aiding slightly faster-than-average growth for the Groupe relative to its peers."