As Publicis' Organic Growth Falls Just 7.4%, Levy Sees 'Slow' Upturn

Third Quarter Improves Over Second as Holding Company Reports $4.8 Billion in New-Business Wins

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NEW YORK ( -- Publicis Groupe's organic growth was down 7.4% in the third quarter, but that still was better than the 8.6% decline posted in the previous quarter. And that prompted Chairman-CEO Maurice Levy to declare the beginning of a "slow and progressive" upturn for the ad market.

Maurice Levy
Maurice Levy Credit: Julio Piatti
For the whole of the year so far, Publicis' organic growth was down 6.9%, and revenue slid 2.3% to $4.8 billion for the first nine months from almost $5 billion during the same period last year. The largest declines came in Europe and Asia-Pacific. In the third quarter alone, revenue fell 5.3% to $1.6 billion from 2008.

In North America, revenue was down 5.3% in the third quarter of 2009. In Asia-Pacific, declines in revenue plummeted further, from 9.9% in the second quarter to 12.4% in the third. In Europe, the company's second-worst performing market, revenue is starting to head north with a decline of 9.5%, vs. 15.8% last quarter.

"If you compare [growth] numbers with what has been published as of today from our industry, you see that we are outperforming the industry by a large margin," said Mr. Levy on the sales and revenue call. Early this month, Omnicom Group reported a third-quarter drop in net income of about 22%.

But powered by gains in digital and the improvement in organic growth, Mr. Levy predicted Publicis, the parent of agency networks Leo Burnett and Saatchi & Saatchi and media agencies Starcom Mediavest Group and ZenithOptimedia, will see its first positive growth numbers in the second half of 2010.

Big wins
Publicis' new-business wins reached $4.8 billion for the first nine months vs. $3.7 billion for the same period last year. Global investment banking and securities firm Nomura ranks Publicis first for new-business wins, which included Anheuser-Busch InBev's Becks; Wendy's in the U.S.; Cadbury in the U.K.; and Carrefour and Fiat in Brazil during the third quarter.

"Organic growth performances exceeding our peers' and share gains: This is the result of our teams' excellent performances, backed by an offer well-adapted to the needs of our clients, particularly in digital," Mr. Levy said. "In 2010, our share in digital should exceed 25% of our revenue."

After its recent acquisition of Razorfish from Microsoft, Publicis now owns the two largest global digital agencies. Under the holding company's VivaKi brand, Razorfish joins Digitas, which posted more U.S. revenue than any other digital agency in 2008, according to Ad Age's DataCenter. Digital communications accounted for 21.3% of consolidated revenue, which is up from last year.

"We have no plans to make further large acquisitions," Mr. Levy said, adding that his company does plan to make smaller acquisitions in emerging markets and digital. Publicis has liquidity of approximately $5.2 billion.

Razorfish cost Publicis about $530 million in cash and stock. Hinting at what's in store for Razorfish, which has traditionally maintained lower margins than its new parent, Mr. Levy said Publicis has brought prior agency acquisitions, namely Digitas, into the fold by "lowering the cost base of the operation."

As for budgets, Mr. Levy said he thinks clients will spend more next year. "I think the good news is that we don't see any further cut," he said. "And that is clearly something, which we see with individual clients as well as in our global numbers. So I believe I have some strong evidence that we reached the end of the crisis."

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