Q2 Organic Growth Rises Only 1% at Publicis Groupe

But weak euro boosts revenue, net income

Publicis Groupe continues to reap the benefits of the strengthening dollar and pound sterling, announcing that second-quarter revenue rose 39 percent to $2.7 billion. But a more telling indicator, organic growth—which removes the impact of currency swings and acquisitions—shows the company grew by only 1 percent in the period, trailing competitors like Interpublic, which reported an increase of 7 percent in second-quarter organic revenue growth, and Omnicom, which reported 5 percent.

Over 50 percent of the Paris-based holding company's revenue is exposed to the U.S. dollar and U.K. pound sterling, currencies with exchange rates rising 23 percent and 13 percent, respectively, against the euro in the first half of the year. During the first six months, Publicis, parent of its namesake global network, Saatchi & Saatchi and Leo Burnett, said foreign exchange benefited the company by adding $525 million to revenue and in the second quarter, $289 million.

There were worrisome spots in Publicis's second-quarter results, chief among them Sapient.

Organic growth at digital agency Sapient, which was acquired earlier this year, was negative for the first time in five years. The much-trumpeted $3.7 billion all-cash deal, which commanded a 44 percent premium, was criticized for the high amount Publicis paid. (It didn't take long for bad news to follow: Last November, just days after Publicis announced its Sapient bid, the agency said its third-quarter net income slid 15 percent.) Nonetheless, in the current second-quarter earnings statement, Publicis CEO Maurice Lévy glossed over any problems and said: "The Sapient integration is not only going to plan, it is slightly ahead of schedule. Most importantly, it is fulfilling promises that exceed  our strategic valuation of the company."

Digital now accounts for 51 percent of Publicis's revenue and generated 5 percent of the company's organic growth in the first half of the year. That overall increase in digital revenue helped offset weak 1.2 percent growth in North America, which was pulled down by continuing problems in Publicis' digital operations there.

Lévy remains bullish for full-year results in 2015 and promises investors "accelerated organic growth" in the second half of the year. Still, with estimates of 2.5 percent organic growth, the holding company would likely continue to underperform compared with its competitors.

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