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Publicis Groupe Reports Quarterly Results Below Expectations

By Published on .

Arthur Sadoun
Arthur Sadoun Credit: Publicis Groupe

Publicis Groupe CEO Arthur Sadoun's talk of "radical transformation" to analysts Thursday did little to dilute the impact of the real news in its third-quarter report: Worse-than-expected results. The company showed year-over-year organic sales growth of 1.2 percent to $2.67 billion, as opposed to the 1.8 percent analysts had wanted to see.

Sadoun noted a steady improvement in organic revenue, from a 1.2 percent decline in the first quarter to 0.8 percent uptick in the second quarter to the 1.2 increase now. But but didn't give much insight into the rest of the year, as the agency-holding company heads often do.

The brightest spot for Publicis was North America, which accounts for 50 percent of the group's business. Its year-over-year organic growth was 3 percent, an improvement over a flat second quarter.

Speaking to analysts in Paris this morning, Sadoun attributed growth in the U.S. to account wins including Hewlett Packard, Walmart, Lowes, McDonald's, Southwest Airlines and Lionsgate, as well as to the group's more integrated structure.

He had a hard-sell message for investors, repeatedly speaking of that "radical transformation" he says he's leading across the group, arguing that the Publicis is shifting from a "communication partner" for marketers to a "transformation partner."

The controversial A.I.powered professional assistant platform Marcel, the group's one-year moratorium on entering creative awards and even the new Publicis Spine platform barely got a mention.

Referring to the ongoing threat from consultancies, Sadoun said, "We are shifting from a model that is advertising to a model that is closer to some of our competition in other areas. ... We come with a solution that is not a communications solution but a solution to accelerate the growth, reduce the cost, and give a new dynamic to the client. [In doing this] you are creating a stickiness and an intimacy that is really different from being a supplier of advertising."

Sadoun's second message to investors was about the importance of talent, citing Annette King, Ogilvy U.K.'s former CEO, whom he poached in late September to become the first CEO of Publicis Groupe U.K. The move toward country leaders is, he says, about accelerating the power of one positioning in places where they have the right talent.

That didn't stop one U.K. ad blog from speculating that Publicis could be a tempting takeover target for a consulting giant or private equity group. And Publicis is lagging other ad holding companies. Omnicom Group (which famously once had a deal to merge with Publicis) reported year-on-year third-quarter revenue growth of 2.8 percent earlier this week.

Third-quarter results across the group, whose agencies include Leo Burnett, Saatchi & Saatchi, BBH, DigitasLBi, Starcom and Sapient.Razorfish, were mixed. Two regions showed decline, with Europe down by 1.5 percent, and Asia Pacific by 3.1 percent. Organic growth was 2 percent for Latin America and 9.7 percent for the Middle East and Africa.

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