Despite 5.4% Organic Slide, Publicis Says Recovery Has Begun

Somewhat improved Q4 performance bolsters hope at holding company

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Publicis Groupe today said its fourth-quarter revenue dipped 5.4 percent in organic terms, a measure that factors out the impact of currency fluctuations, acquisitions and other variables.

That performance constitutes an improvement from previous quarters, and would appear to confirm company CEO Maurice Levy’s belief that the worst of the economic crisis is over, the holding company said. In announcing Q3 results in October, when organic revenue slipped 7.4 percent, Levy was the first industry executive to publicly declare a recovery had begun.

Excluding the impact of key client General Motors, which went through bankruptcy restructuring in June, Publicis’ organic revenue in the Q4 would have declined 4.6 percent — and 5.3 percent for the full year.

The Paris-based holding company’s Q4 performance were generally in line with numbers reported last week by two of its competitors, Omnicom Group and Havas. In fact, Publicis fell between the two, doing slightly better than Omnicom (-6.3 percent) and a bit worse than Havas (-4.4 percent).

For all three agency firms, the fourth quarter brought an improvement, confirming the first signs of recovery.

Overall, Publicis’ revenue fell 6.5 percent in organic terms to $6.2 billion in 2009. The company notched $553 million in net income (down 9.6 percent compared to ’08), or $2.70 a share.

The company said its operating margin fell to 15 percent in 2009 from 16.7 percent in 2008. Restructuring costs in the year amounted to $109.6 million. Publicis’ forecast today of flat margins in 2010 caused the company’s stock to drop in overseas trading.

“While the market overall was down by 12 percent to 14 percent [in 2009], Publicis managed to limit the decrease to 6.5 percent, thereby gaining market share,” Levy said in a statement, citing cost controls and a decline in headcount, along with revenue from added-value services. “We are seeing a steady and continuing increase in our numbers starting last summer, and the trend continued in January 2010. Our objective is to return to positive organic growth, outperforming the market once again, in 2010.”

Levy also noted: “The upheaval in our industry was generated not only by macroeconomic factors; it was also the product of changing dynamics in the communications business,” and said Publicis’ eventual goal is to derive 60 percent of its revenue from digital services and emerging economies.

In 2009, digital services accounted for 22 percent of overall revenue, while emerging economies, excluding Razorfish, comprise another 22 percent.

In 2009, organic revenue dropped 9.9 percent in Europe, with a decline of over 15 percent in Southern Europe. In North America, organic revenue fell 4.2 percent; without GM that decline would have been 1.2 percent. Digital services, which account for nearly 35 percent of revenue in that region, grew 15.3 percent in 2009. Asia Pacific experienced a 7.7 percent decrease in organic revenue; Latin America, bolstered by performance in Brazil, dropped 0.6 percent; and Africa and the Middle East, hurt by the economic crisis in Dubai, fell 4 percent.

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