Publicis stems decline in the third quarter but outlook for the fourth is cautious
How has the agency business been faring amid the pandemic? Well, it’s telling that in its most recent earnings, Publicis Groupe's organic growth was down 5.6% in the third quarter—which was a big improvement and, it says, outpacing the competition.
The holding company has managed to stem a decline in organic growth in its third-quarter results, with a "solid" performance in North America, although the numbers are still negative due to the pandemic and the company is cautious on its outlook for the fourth quarter.
Organic growth was down by 5.6% in the quarter year-on-year, versus a much larger 13% in the second quarter. Net revenue for the third quarter was 2,343 million Euros, down by 9.1 % from 2019.
Major markets such as the U.S. and the U.K. are seeing “significant” sequential improvements, said CEO Arthur Sadoun in a presentation to analysts. North America proved more resilient than Europe, with organic growth down 2.4% from last year and business described by Publicis as “solid.” In the U.S, which now accounts of 60% of group revenue, organic growth was down by just 3% from 2019.
Data business Epsilon “played a vital role” in the U.S. offering, the company said, and Sadoun told Ad Age in an interview that it has had a “halo effect” on the entire business. “We have massive scale in terms of data and technology," he said. New business was also a key factor in the U.S. performance with the company benefiting from some big media wins such as TikTok and Kraft Heinz. "Our performance... is down to new business and our ability to implement our model on clients," Sadoun said. "For the second quarter in a row we are outperforming the market."
In Europe, decline was also stemmed with organic growth down 9% versus a whopping 23% in the second quarter. In the U.K., growth was down 10.6% and in France, where outdoor media has been slow to pick up, 13.8%.
Asia was down 9%. Despite the virus abating there, some clients have been impacted by the exposure to the pandemic, for example, the automotive industry. Latin America has been hit hard by COVID, particularly in Brazil, and organic growth for the region was down 14.8%. However, some markets, such as Italy and New Zealand, recorded positive organic growth.
Some client industry performances are also experiencing positive growth, for example fast-moving consumer goods and healthcare, said the company. Sadoun told analysts: “Some FMCG clients are telling me they are seeing the kind of growth they haven’t seen in decades.”
On the new business front, the company has also benefited from clients conducting big media reviews. "It is the first thing that clients address when they are trying to reinvent their business," Sadoun told Ad Age.
However, the company is cautious on its outlook for the fourth quarter, given the current virus situation in Europe. French President Emmanuel Macron last night announced new lockdowns in major cities, as did the U.K. earlier this week.
Sadoun said that while the situation was unpredictable, the resurgence of the pandemic meant it would be cautious about the next quarter and that fourth quarter results could be lower than the third quarter.
However he insisted that the company was well-equipped to face the challenges ahead. He told Ad Age: “We have the foundation to weather this business. This crisis going to last. What matters is do you have the best offer and the right structure for those times.”
Sadoun said that uptake of Marcel, its employee platform, had been “through the roof” in the pandemic as people work remotely. “It is 80% and the consumption is pretty good.” As an example, Sadoun will use Marcel tomorrow to communicate with 80,000 employees about the results. He added that Marcel is also helping to leverage diversity as “everyone will have an opportunity to progress.”
However, Sadoun, who has been conducting a series of client meetings over the past few weeks, also stressed the importance of face-to-face meetings with both clients and employees where regulations allow. "One of the dangers of remote working and working from home is that you lose loyalty," he said.