Publicis Profits up 15% in First Half of 2013

Improved North America Market Outpaces Growth in Emerging Markets But China Causes 'Uneasiness'

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Maurice Levy
Maurice Levy

Publicis Groupe announced a 15% increase in net profit for the first half of of 2013 to $412 million, on revenues that were up by 8.7% to $4.4 billion. Organic growth, which strips out acquisitions and currency changes, rose by 5% in the second quarter, reflecting faster growth than earlier in the year. Organic growth was 3.2% for the first half of 2013.

North America, boosted by 12.3% digital growth in the first half, grew 7.7% in the second quarter (6.1% for the first half). North America outpaced even the usually faster-growing BRIC countries (Brazil, Russia, India, China) and MISSAT markets (Mexico, Indonesia, Singapore, South Africa, Turkey, which grew by 5.6% in the second quarter and 5.5% in the first half.

Maurice Lévy, chairman and CEO of Paris-based Publicis, said in a statement, "The strong organic growth acceleration at 5% in the second quarter allows the Groupe to significantly improve its performance. This should be put into the perspective of an unpropitious economic situation, fierce competition and an uncertain business environment. The emerging countries are slowing, Europe is struggling to get back on the road to growth, while the U.S. is consolidating its upturn."

Digital growth across the group -- owner of Saatchi & Saatchi, Leo Burnett, Starcom Media Vest and Zenith Optimedia -- reached 13.4% in the second quarter (11.1% in the first half). Publicis Groupe has spent billions of dollars buying digital networks including Razorfish, Digitas and LBi in the last few years, with the result that digital now accounts for 37% of total revenues.

Mr. Levy explained during a conference call with analysts, "The purchase of LBi has changed the math for us, because 90% of LBi revenues come from the U.S. and Europe, so the relative percentage growth in emerging markets is smaller."

He also expressed "uneasiness" over China's continued growth. "There's a new government and a whole new administration which is changing parameters," he said. "Until now the two great growth drivers have been China's role as the 'factory of the world' --with everyone outsourcing or offshoring their operations to China -- and the [rapid construction of] infrastructure. There's now a slowdown in building, and a new step as factories move towards more branded products."

Europe was the weakest performer, with a 1.1% fall in organic revenue during the second quarter (and a 3.6% drop for the first half). Mr. Levy said during the analyst call that he doesn't expect growth in Europe this year. He added, "It's a difficult and uncertain year, and Europe continues to struggle. The [International Monetary Fund] has downgraded its full-year forecast a number of times and competition in the industry is very fierce – it takes a lot of sweat to win."

Publicis Groupe claimed $2.8 billion in new business for the first half of the year, including wins from Pfizer, Bacardi and Total. Average net debt was down to $729 million on 30 June 2013, from $1.1 billion the previous year.

Mr. Lévy added in the statement, "Our balance sheet remains robust and our financial ratios have even improved, so we can look the future calmly in the eye."

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