Account Wins Boost Publicis Groupe's First-Quarter Growth

Publicis Groupe posted organic revenue growth of 1.6% in the first quarter of the year after reaping the benefits of accounts gained in 2017 -- notably McDonald’s, Diesel, Lionsgate, Bradesco and Southwest.

The Groupe reported its first results using IFRS15, the new accounting standard on revenue recognition that became effective on January 1, 2018.

The Groupe's reported net revenue for the quarter was approximately $2.575 billion (2.082 billion euro), down 8.2%. Its 2017 financial statements have been restated using the new accounting rules for the purposes of comparison.

"Our Q1 performance gives us confidence in our ability to reach our objectives for this year, [specifically] to improve our organic growth and our operating margin rate compared to 2017," Arthur Sadoun, chairman, CEO, Publicis Groupe told analysts on a conference call Thursday morning. "Nevertheless, we are all aware of the various challenges our sector is facing and therefore we remain cautious and focused on the execution of our plan."

First-quarter growth was driven by North America, which grew 2.8%. The Asia-Pacific region lagged, however, posting an organic revenue decline of 4.6%. This negative performance is mainly attributed to Australia and the discontinuation of a Qantas call center contract.

China returned to positive growth (+1.1%), despite the impact of accounts lost. Latin America reported organic growth of 11.5%, while The Middle East & Africa region posted growth 4.8%.

With the EU’s General Data Protection Regulation (GDPR) set to be the most significant change to consumer privacy laws in decades, the Groupe is "proactively" implementing GDPR into its product development strategy and greater privacy into all of its services. Although the Groupe's clients are taking different approaches in tackling these new policy regulations, Sadoun cautions that GDRP will have impact globally. Publicis Media's Steve King adds: "We have a very strong ability to increase our scope of services" around this new system.

Asked about the controversies surrounding Facebook (notably the Cambridge Analytica scandal), Groupe officials indicated that the firm has not seen any advertisers respond by avoiding Facebook.

Publicis Media's King believes although there has been no impact in the short term, trust with users may be a longer-term factor. Nonetheless, both King and Sadoun reiterate that Facebook is a very important partner for them. 

WPP's recent turmoil has had no short-term impact on the Groupe's business, with Sadoun dismissing any concerns that Sorrell's departure implicates a larger negative trend for all holding companies. "We are committed to our own road map," he says. "We don't want to speculate on the future of WPP." And he seemed to rule out any interest in possible acquisitions should WPP dispose of some assets. "We are on our own line and not looking behind," he says. 

"We are the only company in the world that can connect data, content and technology to deliver one to one consumer engagement at scale," added Sadoun. "The attractiveness of our offer is particularly encouraging for the next stages of our transformation."

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