Publicis Groupe Profits Grow as Digital Passes 50% of Revenue

Marketers' Rigid Grid of Demands is Making Pitches 'Too Brutal,' CEO Says

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Maurice Levy
Maurice Levy

Publicis Groupe's net income grew 39.6% to $399 million in the first half of 2015 compared to the same period in 2014, boosted by the $3.7 billion acquisition of Sapient in February, the agency company said Thursday.

For the second quarter, overall revenue grew 38.5% to $2.7 billion. Organic growth – stripping out acquisitions -- for the second quarter was 1.4%, Publicis said.

Digital now accounts for 50.9% of group revenue.

Publicis Groupe agencies include Leo Burnett, Bartle Bogle Hegarty, Saatchi & Saatchi, Starcom MediaVest and ZenithOptimedia.

During a presentation to analysts, Publicis Chairman-CEO Maurice Lévy said that the Sapient integration is ahead of schedule, but added that Publicis has been taking the opportunity to make some changes in its structure. "We have been putting our house in order, which has been holding us back a little, but we are preparing ourselves for better growth in the future," he said.

Sapient business declined in both the first and second quarters of 2015, but Mr. Lévy said he expects the network to return to positive growth in the second half of the year. "Sapient has been hurt by two important elements," he said. "A big chunk of Sapient business comes from the energy sector, which has been hit by oil price and taken down investment quite dramatically. The second is a big client in the U.K. that has stopped all investment."

Talking about the number of large accounts, particularly media, in review, Mr. Lévy said that even if the group lost all its accounts that are in review, it would only have an impact on 2.2% to 2.3% of revenue. "We may lose one or two, or win some," he said. "I don't think things will change dramatically."

Mr. Lévy warned, however, that marketers' pitch processes have taken a problematic turn. "Some clients decide on a grid of key issues, and either you fulfill the condition and you are admitted to go to the next level or you don't and you are eliminated," he said. I'm not sure it's something that will last, because it's too brutal and we are losing the qualitative aspects."

In June, Publicis Worldwide won global lead agency status on the $400 million Heineken business from Wieden & Kennedy, and ZenithOptimedia won the $1 billion Coty global media account. "The pipeline is extremely active," he said, "we are winning more than our fair share."

For the first half of the year, North America's organic growth reached 1.2%, with revenue up 51.2% to $2.7 billion, although digital growth in the region was modest at 1.6%. Asia Pacific's organic growth was 3.1% and Europe's 1.8% (held back by a 2.1% decline in the U.K.), but Latin America was down 5.3% compared to the same period last year, largely due to a weak performance in Brazil.

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