Publicis Posts Modest Revenue Bump, but Europe Remains a Concern

Levy Reiterates That 2013 Will Be a Challenging Year

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Publicis Groupe Monday reported 7.6% revenue growth for the first quarter to $2.06 billion, a modest improvement that beat the company's expectations.

Revenue growth in North America was up 7%, up 7.3% in Europe and 14.2% in the segment that includes Brazil, Russia, India, China and Mexico, among other countries. About 50% of the revenue for the first quarter came from North America.

But organic growth -- which excludes acquisitions and exchange rates -- tells a more grim tale for the company, especially for its European segment. Publicis Groupe Chairman-CEO Maurice Levy said that organic growth overall "for the group is ahead of our internal objective despite the fact that the growth is relatively modest." The company reported overall organic growth of 1.3%, but the company's Europe segment reported a drop of 6.5% in the first quarter, a worse decline than predicted. Organic growth in North America helped mitigate Europe's decline, with a 4.4% increase.

"I don't know if it is an industry-wide situation," said Mr. Levy. "We have been surprised by the magnitude of the downturn in Europe. There has been some investment which has been delayed. We have not lost anything significant in Europe," adding that Publicis Groupe has "won a lot of accounts. ...We were expecting to be down between 3% and 4% and 6.5% is much more than anticipated." He also said that in Europe, everything south of Belgium is "not doing very well," while noting that unemployment is rising as the economic crisis continues.

Mr. Levy noted that digital accounts for about 37% of the company's business -- while media accounts for about 17% and advertising accounts for about 29% -- and remains a growth area for the company. Digital accounted for about 33% in 2012, while advertising accounted for 31%. In North America, non-digital business was down by 1.1%, while digital was up by 10.2%. In Europe, the company posted an 8.3% drop in non-digital business and a 0.4% dip in digital. Total digital is up by 8.5%, and non-digital is down by 2.3%. Mr. Levy noted that the digital results were in part due to the "partial integration of LBi in our numbers in the first quarter."

Publicis last year announced the $450 million acquisition of Amsterdam-based digital LBi International, which it merged with its existing Digitas network. operates mainly in the U.S. and Europe.

Mr. Levy reiterated that 2013 will be a challenge. The company expects low growth in the first half of the year, with modest improvements in the second half.

The holding company last year posted a revenue increase of 13.7% to $8.8 billion last year. Mr. Levy at the time said he was "surprised by the cash generated" during a "disappointing" year. Net income, up 22.8% to $983 million, was "a record breaker."

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