No recovery until 2010, Publicis warns

23 July 2009

PARIS: Publicis Groupe, the advertising holding company, saw organic revenues decline by 6.6% in the first half of this year, and predicts there will not be a return to growth until mid-2010 at the earliest.

Total revenues declined by just 0.8%, to €2.2 billion ($3.1bn; £1.9bn), in the period from January to June, while the conglomerate's net income fell from €192m to €167m over this period.

As a sign of the acceleration of the slowdown, like-for-like sales dropped by 8.6% in the second quarter, when total revenues also slid to €1.13bn from €1.17bn in Q2 2008.

The Paris-based firm also saw its operating margin decline by two percentage points between the first half of last year and the corresponding timeframe in 2009, to 13% in all.

More positively, revenues from its digital activity, which account for 20.8% of Publicis' business, rose by 5.7%, but figures in emerging markets, which deliver 21.9% of sales, dipped by 3.7%.

By region, organic revenues tumbled by 11.6% in Europe, to €738m, while North America was off by 3.7%, to €1.1bn, and Asia Pacific posted a decline of 8.2%, to €238m.

In contrast, Latin America registered an improvement of 1.2%, to €109m, with Africa and the Middle East also up by 0.5%, to €63m, although all of these regions delivered declines in Q2.

Net new business wins for the period totalled $3.2bn, making Publicis the best-performing holding company on this measure, according to Nomura.

Client briefings awarded in H1 included a global account from Carrefour, wins in China with BMW and China Mobile, and appointments by JP Morgan Chase and Miller Coors in the US.

Based on the current climate, Publicis predicted "the low for the year should come in July, or August at the latest, with slow recovery beginning in September."

Moreover, the "first positive growth figures should appear around the middle of 2010, though these would benefit from a favourable basis for comparison."

Speaking about the results, Maurice Lévy, its ceo, argued that "as we planned and expected, the second-quarter has been going down quite sharply, much less than the forecast of the industry, so we believe that we have won some market share."

However, "emerging markets, as well as digital, have helped us to mitigate the effect of the current crisis and the downturn of the economy, and the downturn of our sector. So, we are very happy with what's happening in those segments."

The owner of Saatchi & Saatchi and Leo Burnett will also "have to do much more in these two areas and we think that we have such a position in digital that we should take advantage of it to strengthen even more our position," according to Lévy.

Similarly, it will try to "reduce our headcount in a very responsible way", and continue to "cut our costs where it is necessary or indispensable to do, and we have done a relatively good job" thus far in this area, he added.

Data sourced from Publicis/EuroBusiness Media; additional content by WARC staff