Will 2018 Mark the End of Publicis Groupe’s Financial Struggles?
CEO Sadoun cites optimistic 2017 earnings report
Publicis Groupe is optimistic about its prospects for 2018, and after this morning’s annual earnings call, investors seemed to agree: the holding group’s stock price had gone up by approximately 5 percent as of this afternoon.
“We delivered solid results that demonstrate that we are resilient and are doing what we said we would,” chairman and CEO Arthur Sadoun told Adweek.
2017 was the year that Publicis followed through on its long-rumored plans to name Sadoun as the successor to Maurice Lévy, who ran the holding company for 20 years before stepping down.
This morning’s call reported that fourth-quarter revenue grew organically 2.2 percent to €2.6 billion ($3.2 billion), while full-year revenue increased 0.8 percent to $11.8 billion. The numbers were particularly positive for North America, where fourth-quarter and full-year sales increased 4.4 percent to $1.62 billion and 0.5 percent to $6.35 billion, respectively.
Last year, the company very publicly committed to cutting costs, making headlines when it announced plans to sit out all awards shows in order to focus on developing AI-powered “professional assistant” Marcel. Today’s report indicated those plans may be working: Publicis reported that personnel costs had declined 1.4 percent and constant restructuring costs were down 2.1 percent in 2017. The company also slashed freelance expenses to $457.8 million in 2017 from $543 million in 2016 as it worked to position itself as a one-stop shop for clients.
All major holding companies, including Publicis, WPP, IPG and Omnicom, have been reeling from a downturn in global ad spend for 2016 and 2017, but today’s results show a sliver of hope for the industry at large (Publicis was the first to report full-year results).
In a recent research note, Morningstar analyst Ali Mogharabi predicted these companies’ woes may be coming to an end, noting that “the macro environment points to growth in advertising spending during the next few years” and that agencies can benefit by enhancing their global portfolios’ digital offerings. On this front, Publicis’ Leo Burnett acquired two digital agencies last year, The Abundancy and Ardent. Revenue from these acquisitions added nearly $16 million to the group’s total for 2017.
While digital media was a major focus for Publicis in 2017, the company has also sought to strengthen its creative positioning, most recently by hiring R/GA veteran Nick Law as global chief creative officer.
“When somebody so iconic in the market like [Law] decides to move to Publicis, we take it as a great sign we are on the right track,” Sadoun noted. “We’re incredibly touched that he trusted us to come here.”
Sadoun also said that Saatchi & Saatchi’s Tide ads for the Super Bowl LII, which quickly went viral, perfectly demonstrated how Publicis agencies look to emphasize creativity and innovation moving forward. For the Big Game, Tide placed a spot in every quarter, each of which started out in a wildly different direction and then revealed at the end that it’s actually a Tide ad.
On the media side, Sadoun thinks the big reviews will keep coming thanks to client demands for transparency and further disruption of the media industry. “I don’t want to be presumptuous,” he said while predicting that this trend could amount to a big opportunity for Publicis. “There’s [another] ‘Mediapalooza’ for sure.”
In 2017, Publicis Media won more clients than any of its other divisions, which included Publicis.Sapient, Publicis Communications, Publicis One and Publicis Health. Data division Publicis Spine, only added to the lineup in October, was not included in the roundup. U.S. media business wins included H&R Block, KFC, Mattel and David’s Bridal.
Only time will tell whether 2018 marks a turning of the tide for Publicis and its fellow holding groups.
