Publicis Groupe Posts Weak Results

CEO Maurice Lévy braces for a 'difficult' year

Publicis Groupe delivered disappointing second-quarter and first-half results, with chief Maurice Lévy saying 2014 will “be a difficult year.”

The French holding company posted flat organic growth in the second quarter, compared to a more than 3 percent increase in the first quarter. Revenue dropped 1.5 percent to $2.37 billion.

In the first half, organic revenue grew nearly 2 percent while revenue was flat at $4.52 billion. Net income plummeted 17 percent, to $350 million, from the year-earlier period.

“These figures are not satisfactory by our standards. They are not consistent with what our operations can achieve,” Lévy said, in a statement. “For the second part of the year, we can confirm that we are already on track for higher growth, and this should be evident as of the third quarter.”

The holding companty blamed the results on the negative impact of exchange rates and a weaker second quarter than was previously expected because of the cancellation or postponement of campaigns. Lagging performance in Europe and at the company’s operations in emerging economies also pulled down results. (Organic growth in North America rose more than 1 percent.) Despite better prospects for the second half, Publicis Groupe said it will now put more emphasis on controlling costs.

“Given the situation in Europe and the slow pick up in the emerging economies, we prefer to be extremely cautious on growth prospects and prioritize cost control in order to achieve a margin closer to our goal for the full year,” Lévy said.

The operating results come on the heels of the collapse of Publicis’ proposed merger with U.S.- based rival Omnicom. The results will add more pressure on executives at operating units, particularly agencies like Starcom, which is currently defending both its global Samsung media business and that for A-B InBev in the U.S.

Brian Wieser, a senior research analyst with Pivotal Research Group, said the Publicis Groupe numbers came in “worse” than he expected.

“While a soft top-line was not surprising, weak margins were more so," he wrote in a note. “More critically, margins came in much below where we expected at 13.0 percent vs. 13.7 percent in the year-ago period.”