Publicis Groupe reported a 2.5% drop in revenue for the fourth quarter of 2016, to $2.9 billion. Organic growth, which excludes acquisitions, was also down by 2.5%.
Revenue growth for the full year was +1.4% in 2016, with organic growth of just 0.7%. The results were dragged down by a poor year in North America, where organic growth plunged by 6.9% in the fourth quarter and was down 2.2% for the full year.
Speaking to analysts at Publicis Groupe's full-year results presentation in Paris this morning, Chairman and CEO Maurice Lévy – who hands over to his successor Arthur Sadoun, currently CEO of Publicis Communications, on June 1 – blamed the North America results on the impact of media account losses in 2015 and the first half of 2016, serious issues at digital agency Razorfish, low market growth in the region, and comparison with particularly good results the previous year, when North America grew by 6.3% in the fourth quarter of 2015.
Mr. Lévy said, "We were hurt big time in Q4 – more than we expected. The impact will still be felt in the first and maybe the second quarters [of 2017]. We weren't expecting the market going south, and the difficulties with Razorfish. If Razorfish had not had negative growth, there would have been no decline in the U.S."
He said that the death of Razorfish CEO Tom Adamski in October 2015 was a blow to the company, but said that he still considered Razorfish to have been an "excellent acquisition" in the long term. Publicis Groupe bought Razorfish in 2009, and in November 2016 merged it with SapientNitro to form SapientRazorfish. (The company said in its earnings statement that given slower-than-anticipated growth from its digital businesses, it booked a non-cash depreciation charge of $1.54 billion, almost all of which was for Publicis.Sapient.)
Of the other regions, only Europe (+5.1%) and Middle East & Africa (+1.3) posted any growth in organic revenue in the fourth quarter. Asia Pacific was down by 1.5% and Latin America by 1.1%. For full-year 2016, all regions except North America posted some growth.
Mr. Lévy stressed that 2016 was about transforming an "advertising holding company" into a "connecting company" with the new "Power of One" approach that eliminates silos and "has the client at the core." He also spoke of promising new business momentum, including recent wins from HSBC, KFC, Merck, and Kellogg's Special K.
He added that 2016 was a "busy year" and said it was "like changing the tire of a car while driving" in terms of transforming the group while pitching to retain and to win business.
After 30 years as leader of Publicis Groupe, Mr. Lévy will present his last financial results for the company when the first quarter figures for 2017 are published in May, before handing over to Mr. Sadoun and moving on to take up the position of chair, of Publicis Groupe's supervisory board. The current chair, Elisabeth Badinter (daughter of Publicis Groupe founder Marcel Bleustein-Blanchet, who was the company's first and only leader other than Mr. Levy), will remain on the board.
First quarter results in May are not likely to be a big improvement, Mr. Lévy warned. He said, "There is a lot of uncertainty around a clear hard Brexit … and with the election of Donald Trump, we do not know what will happen in terms of policies and executive orders. We have seen the comeback of Vladimir Putin and that of China. These events will result in geopolitical changes with economic consequences that no one can predict. We can expect that 2017 will be a period of uncertainty – particularly if we add to this the French and German elections."
However, Mr. Lévy expects tthat he second quarter of 2017 to be better than the first three months, "gaining momentum" for the rest of the year. He added, "It looks like Donald Trump's objective is to give more jobs and better pay to Americans, which may fuel growth not only in the U.S. but worldwide – the U.S. generates growth for the world."
Speaking about handing over to Mr. Sadoun, Mr. Lévy said, "I am sure he's the right choice for the future of the group. We also have Steve King [CEO of Publicis Media] joining the directoire [management board]. They were the two selected ones in the finals and they will be working closely together as a real team. They will get the Publicis Groupe back to growth pretty quickly and will make it greater."