Publicis Reports Q3 Organic Revenue Growth of Just 0.7%

With Sapient Deal, Revenue Jumped by 33%

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Maurice Levy.
Maurice Levy. Credit: Fabrice Dimier/Bloomberg

Publics Groupe's organic revenue, which excludes acquisitions, was up by just 0.7% in the third quarter, and 1% for the first three quarters of 2015. But overall revenue was boosted by 33% in the third quarter, to $2.6 billion, when the $3.7 billion Sapient acquisition that closed at the beginning of the year is included.

Speaking with analysts this morning, Publicis Chairman-CEO Maurice Lévy blamed poor growth on the fact that the group has been battling on three fronts this year.

First, he claimed the new business pipeline was weak at the beginning of the year because management had been concentrating earlier on the failed merger with Omnicom, which was called off in May 2014.

Second, he said the "Mediapalooza" series of mega-media reviews means agencies are having to spend a lot of time both "defending" and "attacking" business; and third, Mr. Lévy cited the energy expended on integrating Sapient into the group this year.

Mr. Lévy said, "Our teams have been superb – very few would have been able to do such a great job on so many fronts – and I'm extremely confident for our future."

Short term, however, he is "cautious" about the fourth quarter, mostly due to short-term budget cuts, particularly in the pharmaceutical industry, and delays in some package goods product launches.

Latin America, where revenue fell by 16.3% even including the Sapient deal (Sapient isn't big in Latin America), is an area of particular concern for Publicis. Mr. Lévy said, "I don't see any progress from Latin America in the short term. Brazil is suffering social issues and political unrest. The 2016 Olympic Games will not bring as much [business] as normal because they are taking place in a country with various problems."

All other regions showed some growth, although organic growth in the U.S. was only 0.4% in the third quarter, and 49.2% including acquisitions, reflecting a big boost from Sapient. "In the U.S. there has been a collection of issues and our teams have been extremely busy with 'mediapalooza.' We still have P&G, Fox and L'Oreal [reviews] to end the year."

Looked at separately, Sapient achieved 5% organic growth in the third quarter, after a slight decline in the first half of the year. That turnaround has happened, Mr. Lévy said, because the integration is going "according to plan" and the oil sector has returned to growth.

Mr. Lévy also emphasized that the Sapient acquisition has set up Publicis Groupe for the future. The media reviews, he said, are "very strong on pricing pressure ... If we fight on price we don't win. We need a new model… In a race, you have to look at the finishing line and I believe we will win big time because we are ahead regarding our transformation and transforming our offering to our clients."

A Publicis Groupe chart showed that Publicis had either won or retained media business this year from clients including Citibank, Coty, Etihad, Kraft Heinz, Sears, Taco Bell, Mondelez (outside the U.S.) and Visa, but lost Coca-Cola and Mondelez in the U.S.

Organic growth in Europe was 0.6% in the third quarter, with France and Germany doing relatively well, but U.K. revenues were down by-5.1%.

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