Despite Negative Organic Growth, Some Bright Spots for Publicis Groupe in 2019

Publicis Groupe released its annual report for 2019 today, with results mostly in line with expectations after Publicis cut its revenue forecast for the second time in October, sending its stock plummeting. CEO Arthur Sadoun noted that the 2.3% decline in organic growth for the year was actually better than the predicted 2.5% drop. The holding company's organic growth for Q4 was down 4.5%. He cited "the attrition that we are seeing on traditional advertising in the U.S.," as well as the cost of recent transitions and structural changes, such as the implementation of a new country-focused operating model, management changes and repositioning to focus on business transformation. Organic growth in North America was down 3.5% for 2019 and down 4.9% in Latin America. Europe also saw an organic revenue decline of 2% for 2019. Organic growth was positive in the Middle East and Africa (10%) and Asia-Pacific region (0.8%). "We did not lose any significant clients in 2019," Sadoun told Adweek, explaining that the type of client budget cuts typical in the industry contributed to the decline in organic growth, particularly in terms of its impact on traditional and brand advertising offerings, which he said was "normally the first thing [clients] cut." He added that Publicis Groupe is taking a hit now as it transitions to a model more in line with future trends, including its move to focus on data and technology with Epsilon. Sadoun also stated that improved organic growth was a "top priority" for 2020, along with Publicis Groupe's product and culture. The holding company's net revenue was up 9.3% for the year, which Sadoun looked to as a source of optimism and confidence that its transformation strategy was paying off. Sadoun also called Publicis Groupe the "clear leader on new business," citing data from Goldman Sachs and JP Morgan. [kickout id="1"] This week Bank of America consolidated its account with Publicis Groupe's dedicated unit GroupeConnect, something Sadoun cited as "another example of the momentum we are having at the moment." "The changes of the last year are paying off now with such an iconic triumph as Bank of America," he added. The holding company's acquisition of Epsilon contributed significantly (16.2%) to its net revenue in the second half of the year. Sadoun said that following the transformational changes of 2019, Publicis Groupe had no significant structural or asset changes planned for 2020. "We will continue to bring very strong talent on board and apply our model," he said. "Now, it's really about execution." That comes in contrast to reports that Publicis Groupe employees feel unrest in anticipation of further restructuring. "We are talking about a handful of anonymous former employees. We are 80,000 people in an industry where the turnover rate is 20%, so you will easily find [people leaving]," Sadoun said. "This is facts versus rumors." "We have brought on board [in] the last two or three years a new generation of talent that is making a huge difference," he added. "[There's] frustration with former executives. That’s normal. It's part of the journey. Others want to join [Publicis Groupe]." Sadoun acknowledged that Publicis Groupe could do more to communicate with employees about recent changes. "We have to make sure that everyone is part of this journey," he said. "It is critical for people to feel a sense of belonging." "You can never communicate enough," he added, especially given the speed of transformation at the company. "We're far from being there, I don't know if we ever will be. We need to be very pragmatic and committed to [communication]." Looking ahead to 2020, Sadoun thinks Publicis Groupe is well-positioned to deliver on a strategy across creative, media, data, technology and business transformation. While acknowledging that Publicis Groupe has work to do to "bring creativity into a more dynamic role," he stressed the strength of its media agencies and its ability to help clients leverage first-party data through Epsilon and business transformation through Sapient. "We are the only group in the entire industry that provides at-scale media, creative and technology," he claimed, adding that Publicis Groupe is "building the model of the future." "The future is there. We are in an industry where we know the recipe for success," he added. "Now, we need to make sure we apply it."