Publicis Produces Mixed Results

NEW YORK Although Publicis Groupe reported weaker organic growth in the fourth quarter and a decline in full-year 2008 net profit, the French holding company produced relatively strong results given the current operating environment.

Publicis said Q4 organic growth rose 1.1 percent in the quarter, compared with 4.4 percent in the year-earlier period. Revenue increased 5.5 percent to $1.8 billion.
 
“Although positive, this growth — down compared with the previous quarters — reflects the decline of the real economy in several sectors and various regions of the world,” Maurice Levy, Publicis chief executive, said in a statement. “It is, however, of note that high growth continues in the media and digital businesses, and in many countries of the emerging economies.”

Net income in 2008 dropped 1.1 percent to $585 million on flat revenue of $6.1 billion.

However, Publicis made its full-year target of 3.8 percent growth in organic revenue, up from 3.1 percent in 2007. Thanks to “ongoing efforts to control costs,” the company also posted a record-operating margin of 16.7 percent.

“Today we are confronted with the very first global crisis affecting all economies in various ways,” Levy cautioned. “Some sectors — financial, real estate or the automotive industry — have already been severely damaged. However, a credit crunch could very negatively impact other sectors of the economy.”

But the CEO vowed: “We are entering 2009 with great serenity and serious minded. … This is the year to win market share and consolidate our margins.”

Publicis said it won $5 billion in new business in 2008.

In the fourth quarter, organic growth in Europe declined 1.8 percent and 1.1 percent in the Asia-Pacific region. Organic growth rose 1.8 percent in North America, 2.8 percent in Latin America and 36.7 percent in Africa and the Middle East.

Breaking down 2008 results by region, in Europe, Publicis cited budget gains of Publicis Conseil while the U.K., Germany and Spain lost ground. Organic growth in North America climbed 4.4 percent, boosted by the company’s digital business and media, although those sectors slowed in the fourth quarter. In the Asia-Pacific region, China and India posted organic growth of 12.8 percent and 17.4 percent, respectively, which was offset by declines in Japan and Korea. Latin America gained from strong growth in Venezuela and Argentina and from good growth in Brazil. The combined organic growth from BRIC countries — Brazil, Russia, India and the greater China region — was 14.2 percent.

Levy cited the operations in those emerging economies and its growing digital business as major factors in the company’s results. In 2008, Publicis’ digital business comprised 19 percent of revenue, compared with 15 percent a year earlier. The company is aiming to generate a quarter of its revenue from digital by the end of 2010. Publicis also wants to increase its share of revenue from emerging economies to 25 percent by 2010. Last year those countries represented 22.9 percent of the company’s revenue, compared to 21.3 percent in 2007.

Levy, who has said he expects global advertising to fall by 2-3 percent this year, was hesitant to give guidance about his company’s results for 2009.

“After the bankruptcy of Lehman Brothers and given the state of quasi-bankruptcy of many large financial institutions, the crisis suddenly changed its scope, to affect nearly all the sectors of activity and an increasing number of countries,” he said. “This is the first worldwide economical crisis and its effects are as yet unforeseeable.”

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