Favorable Exchange Rates Boost Publicis Groupe’s Growth

Revenue grew 32% in Q1 but only 1% organically

Publicis Groupe said organic growth was flat in the first quarter while the positive impact of foreign exchange and acquisitions like Sapient boosted revenue growth by 32 percent.

The holding company reported revenue of $2.3 billion in Q1. Organic revenue increased nearly 1 percent, due largely to digital operations, which grew 5 percent organically and now constitutes more than 50 percent of revenue.

"We expected organic growth to be slightly down this quarter, but, on the contrary, it is up almost 1 percent," Publicis CEO Maurice Lévy said, in a statement. "This isn't yet the growth rate we expect to see out of Publicis Groupe, but is nonetheless an encouraging return to growth."

In contrast to digital, revenue for the company's legacy analog operations fell nearly 2 percent. 

More than 50 percent of the holding company's revenue is generated in U.S. and U.K. currencies, with the Euro down 22 percent against the dollar and 11 percent against the pound. Because of that, exchange rates had a positive impact of $230 million on first-quarter revenue, equivalent to more than 13 percent of revenue in the 2014 comparison period. When foreign exchange is factored out of the Q1 growth, revenue increased 16 percent.

Publicis Groupe's acquisitions contributed $293 million to revenue in the first quarter.

Europe, boosted by the strengthening dollar, fall in oil prices and the European Central Bank's monetary policies, fueled the organic growth, rising nearly 2 percent. Organic growth in North America was flat at 0.8 percent and in developing economies, it dropped nearly 3 percent, with Publicis blaming sharp revenue drops in Russia and Brazil along with a decline in China because of a sluggish luxury goods sector.

Even as the company continues to recover from the company's failed efforts to merge with Omnicom, Lévy sounded an optimistic note about his group's digital future in which he expects those operations will comprise 60 percent of revenue by 2018.

"With the acquisition of Sapient, Publicis Groupe has become the only global group present all along the value chain—from consulting to marketing, from communications to commerce—brought to life through an outstanding expertise in the most high-performing technologies," he said. "We are working on commercial propositions that should enable us to achieve all our medium-term goals."

Publicis didn't provide specific financial forecasts for the rest of the year other than to say the second quarter will be better than the first quarter with "modest growth" and business should be "considerably stronger" in the second half of the year.