Publicis Reports Stronger Third Quarter Despite Challenges on the Creative Agency Front

The company will divest itself of its Public Health Services division

Publicis CEO Arthur Sadoun announced plans to sell Public Health Services division following strong third quarter.
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Publicis Groupe came back strong in the third quarter of 2018 after disappointing second-quarter results. The holding company reported organic growth of 2.2 percent overall, excluding results from its Public Health Services division. It also announced today that it will divest itself of that business following a strategic review.

Reported revenue was 2.2 billion euros ($2.5 billion) in the third quarter, a 0.5 percent increase from the same period a year ago. Publicis stock rose as much as 8 percent this morning after the report’s release.

In the three-month period that ended on Sept. 30, North America saw organic growth of 1.1 percent excluding Public Health Services, 1.3 percent in the U.S. alone. Publicis CEO and chairman Arthur Sadoun said the U.S. is a market particularly receptive to the company’s AI-powered Marcel platform, “Power of One” model and “2020: Sprint to the Future” plan that includes its custom PeopleCloud platform, helping it “largely overcome the challenge we are facing in creative activities.”

"In every region, we are growing, which is something that is important."
Arthur Sadoun, chairman and CEO, Publicis Groupe

Europe generated 4.2 percent in organic growth in the quarter.

“In every region, we are growing, which is something that is important,” Sadoun told Adweek following the release of the results. He said the value and creative thinking fueled by technology and data Publicis can offer at scale has pleased clients and generated new business, pointing to its win in the recent global GlaxoSmithKline (GSK) media review as proof.

Meanwhile, as Publicis initiates its divestment from Public Health Services, it has also begun a separate review of all existing assets.

Publicis blamed the financial troubles it dealt with in the second quarter on the Public Health Services division, which services contract sales organizations and which the company claimed no other healthcare communications network houses.

Due to the “highly volatile” nature of the Public Health Services business, clients have frequently postponed and even canceled campaigns already in production, according to Publicis. In the first nine months of 2018, Public Health Services saw accelerated revenue declines.

Sadoun said the divestment process “is on its way,” and the company is in talks with several unnamed buyers to acquire the business.

“We are keeping our health business,” Sadoun said. Public Health Services is “an outsourcing” service that is “uncalled for” and does not bring the type of value Publicis aims to bring to clients as it looks to transform their businesses.

With the overall pharmaceutical industry changing so much worldwide, Publicis believes its offering of “data, dynamic creativity and digital business transformation” is aptly suited to meet the needs of its clients.

“We want to focus on areas in which we can make a difference,” Sadoun said.

The separate review will look at the company’s “aggressive” acquisition strategy, what assets it lacks and what existing assets are “a distraction” from the overall business, according to Sadoun.

This summer, Publicis bought Morristown, N.J.-based Payer Sciences, a marketing and analytics agency that supports pharmaceutical companies in their dealings with reimbursement systems in the U.S., along with a digital and creative agency in Sao Paulo called One Digital, for undisclosed sums.

In July, Publicis folded SapientRazorfish, its “digital transformation agency” formed by the merger of SapientNitro and Razorfish, into Publicis.Sapient, one of the company’s four major “solutions hubs” that also houses Sapient Consulting.