Publicis Groupe Blames Weak Q3 on Merger Distractions

Organic growth rose just 1%

Publicis Groupe had another weak earnings period in the third quarter, as chief Maurice Lévy alluded to the company’s failed $35 billion merger with Omnicom and admitted "management was too focused on other plans and not enough on the short-term performance and growth."

Organic growth was up just 1 percent in the quarter while revenue increased slightly more than 4 percent to $2.21 billion. The company also blamed poor organic growth on the contracting global economy—particularly in some emerging markets—as well as weak performance in Europe and a  "temporary" setback at digital shop Razorfish, which was impacted by stuggles at clients Motorola and BlackBerry.

"Organic growth has slightly picked up compared to the second quarter of 2014 but does not match our expectations," Lévy said, in a statement. In releasing second-quarter results in July, the Paris-based holding company said organic growth was flat and Lévy cautioned 2014 would "be a difficult year."

By contrast, erstwhile merger partner Omnicom Group, which reported its results on Tuesday, said organic growth climbed more than 6 percent in Q3. Interpublic Group achieved that level of quarterly organic growth as well.

Regionally, Publicis Groupe showed no organic growth in Europe and the regions known as BRIC (Brazil, Russia, India, China) and MISSAT (Mexico, Indonesia, Singapore, South Africa and Turkey). Organic revenue climbed a little more than 1 percent in North America, where the company said results were hit by spending cutbacks by several large unidentified advertisers and “most of all, underperformance at Razorfish.”

Organic growth in the quarter rose 2.1 percent in high-growth economies, which now account for 23 percent of Publicis Groupe’s revenue but that amount is down slightly from the year-earlier period due in part to some economic slowdown in China and Brazil.

On a more positive note, Lévy cited the retention of Samsung’s global creative and media business by Leo Burnett and Starcom, respectively.

"There are much positive news that testify to the vitality of the group and are very encouraging. Starting with digital, which now accounts for 42 percent of our revenue and is growing by more than 9 percent, as well as the great victory of the Samsung competition," Lévy said.

For the first nine months, Publicis Groupe reported organic revenue growth of 1.5 percent on revenue of $6.5 billion, a 1.6 percent increase from the year-earlier period. Lévy said end-of-the-year results won't differ much from the first nine months, but added: "We are at the end of this cycle and very confident in the future. Very important decisions have been made including management teams and organization."

In September, Publicis Groupe unveiled a corporate reorganization that extended Lévy’s reign as CEO and named Robert Senior to succeed Kevin Roberts as global CEO of Saatchi & Saatchi, which Roberts has led since 1997.