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Publicis Reports Second-Quarter Organic Revenue Growth of 7.1%

Chairman-CEO Maurice Levy Promises More Attention to Lagging China

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PARIS (AdAge.com) -- Publicis Groupe today reported an organic revenue increase of 7.1% for the second quarter of 2010 as growth returned to most regions, and Chairman-CEO Maurice Levy predicted further improvement for the full year.

The 7.1% organic growth figure strips out currency fluctuations, acquisitions and disposals. Overall, revenue growth for the second quarter was 21.3%, to $1.8 billion.

"We are in a strong position to build growth and provide better margins in the future," Mr. Levy said. "I would not dare to say the crisis has passed, but we are getting out of it, and we have good momentum."

The European debt crisis and the general lack of financial confidence around the world are not causes for great concern, he said, but they are a reminder of the need to remain cautious about the recovery.

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Publicis Groupe, which owns Leo Burnett, Saatchi & Saatchi, Publicis Worldwide, Starcom MediaVest and ZenithOptimedia, is the world's third largest communications group, behind WPP and Omnicom Group.

Revenue grew in Publicis Groupe's four biggest regions in the first half of 2010: North America (up 6.6% to $1.65 billion), Latin America (up 10.8% to $165 million), Asia Pacific (up 6% to $375 million) and Europe (up 3.1% to $1.05 billion). Only the region comprising Africa and the Middle East, still hard-hit by a property crisis in Dubai, failed to grow (down 3.3% to $82 million).

Revenue growth in China of less than 5% was below expectations, and Mr. Levy said Publicis is addressing that. "It's a very complex market," he said. "Multinational accounts are growing at a reasonable pace, but not as quickly as in the past, because they now have a well-established position. Big national accounts like China Mobile are big spenders, but the growth is not so much.

"The vast majority of the growth comes from medium and large local companies, but because of the level of sophistication of their services and the fees they are prepared to pay, holding companies are not having a lot of relationships with this type of client."

Mr. Levy said that members of his executive team will make a "deep dive" in China and come back with a strategic proposal to find an approach that will help Publicis Groupe grow faster in the region.

Overall, Mr. Levy claimed new-business wins of $2.1 billion so far this year, including brands such as Nokia, Kraft/Cadbury, Sears, French Connection, BlackBerry, Arla Foods, Honda, Reckitt Benckiser and Nestle.

Part of Publicis Groupe's success, Mr. Levy said, is due to the decision in 2006 to "take the lead in the digital space." Digital now accounts for 42.5% of revenue in North America, and 28.1% globally, up from 20.1% in the first half of 2009.

North American growth -- which hit 8.1% in the second quarter -- was largely thanks to digital and health-care expansion, while in Europe, increased spending and breadth of client activity -- as well as new business -- fueled growth.

The U.S. is Publicis Groupe's biggest individual country market, followed by France and the U.K. Mr. Levy predicted a positive trend in Europe would remain, despite government budget cuts. "Consumer morale is less gloomy than it was at the beginning of the crisis," he said.

The group's biggest growth came from India, Korea, Mexico, Russia, Spain and Turkey -- all of which grew by 10% or more in the first half of the year. Brazil, Canada, France, the U.K. and the U.S. grew between 5% and 10%, and Australia, Greater China, Italy and Japan grew by up to 5%.

But revenue fell by up to 5% in the Netherlands, Poland and Switzerland, and dropped even more in Belgium, Germany and the United Arab Emirates.

Publicis Groupe's salary and hiring freezes are gradually being lifted after reducing the cost base. "We've improved the organization because we offer the same service with less people," he said. "The increase in freelancers gives us more flexibility."

Separately, in a sign that big deals as well as growth may be returning to the ad industry, Aegis Group announced plans today to buy Australia's biggest independent media buyer, Mitchell Communications Group, which has also diversified into other marketing services. After posting disappointing 2009 financial results earlier this year, Aegis said it was raising money to make acquisitions.

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