Publicis Groupe Organic Revenue Up 5%

Publicis Groupe posted better-than-expected results in the second quarter, fueled by continued growth in the U.S., good results in its digital operations and stabilization in Europe. The Paris-based holding company said revenue rose 9.6 percent to $2.3 billion, with organic growth up 5 percent.

Revenue for the first half was $4.4 billion, an 8.7 percent increase on the year-earlier period, and organic growth increased 3.2 percent. Net income rose 15 percent to $410 million.

“The strong organic growth acceleration at 5 percent in the second quarter allows the Groupe to significantly improve its performance,” Publicis CEO Maurice Lévy said in a statement. “This should be put into the perspective of an unpropitious economic situation, fierce competition and an uncertain business environment. The emerging countries are slowing, Europe is struggling to get back on the road to growth, while the USA is consolidating its upturn.”

The company now expects full-year organic growth to be around 3.6 percent, the high point of previous projections of a range of 3.2 to 3.6 percent.

Publicis’ digital operations drove first-half results. With organic growth up 11 percent, digital now accounts for nearly 37 percent of the Groupe’s revenue, up from 33 percent a year ago. Digital increases were particularly key to U.S. gains.

The company underscored its strong performance in North America, which posted 6.1 percent organic growth in revenue in the first half and Publicis said the region continued to show strong resilience, despite its 2012 loss of GM’s media and search accounts, which continued to negatively impact the company’s results until the middle of the second quarter.

In emerging markets, Publicis rung up a 5.6 percent increase in organic growth, despite a slowdown in the Chinese economy. In the Greater China region, the company saw an 11.5 percent increase in organic growth.

Europe declined 3.6 percent, although the company noted a “marked improvement in northern Europe in the second quarter”. France improved slightly, but was still down 4.7 percent in the first half, while the U.K. was off 3.2 percent. Germany recorded growth of 3.5 percent but Southern European countries were still mired in decline, with Italy down 14.2 percent and Spain off 8.4 percent.

The company’s healthcare operations continued to show negative growth, but Lévy said that slowdown is improving and that he expects positive growth in the third quarter.

The company’s shares jumped 4.1 percent after the earnings release.

“Sentiment around Publicis should be rightfully more positive following these results given concerns that had arisen regarding emerging market slowdowns,” Brian Wieser, senior research analyst, Pivotal Research Group, wrote in a research note. “More importantly, given the company’s absolute revenue concentration in North America and Europe, North America was very strong at 7.7 percent for the quarter. Europe was also more favorable than we would have anticipated, with only a 1.1 percent decline, a significant improvement over (the first quarter’s) -6.5 percent.”

Wieser now expects full-year organic growth of 3.8 percent, higher than the company’s current guidance to investors.

Publicis also updated the results of its co-investment program that was offered to key executives earlier this year. With 190 subscribers, 96.4 percent of eligible executives have taken part in the Publicis Groupe stock purchase program. Applications totaled $176 million, with the offer oversubscribed three times, the company said.