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Publicis Groupe’s H1 profit drops down 17 per cent, exchange rates impact numbers

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MUMBAI: With the slowdown of global economic activity since the start of the year and economic uncertainties prevailing in several regions of the world, Publicis Groupe has announced that its second-quarter performance was well below that of the first quarter. The company saw a 16.9 per cent fall in first-half net profit to Euro 260 million as compared to the Euro 313 million in the corresponding half of the previous calendar year-2013.

Due to the substantial impact of the strong Euro (Euro 81 million negative impact in Q2 alone), the Group’s reported consolidated revenue for Q2 2014 was Euro 1,761 million, down 1.5 per cent as compared to the Euro 1788 million in H1 Q2 2013.

The group says that organic growth of just 0.5 per cent was largely due to unfavourable comparable (+5.0 per cent in Q2 2013), but also to the persistent weakness of certain markets and investments on the part of a number of clients who substantially downsized their budgets.

In a statement published on the group’s official website, Publicis Groupe chairman and CEO Maurice Lévy said, “The first half-year was heavily impacted by exchange rates which had an adverse effect on revenue of Euro 148 million. At constant exchange rate, revenue would have increased by close to 5 per cent during the period.

As we predicted last fall, growth stalled in the second quarter. However, it should be underscored that weakness was stronger than expected mostly due to the cancellation or postponement of campaigns and lagging economies in Europe and in emerging countries. Our organic growth was +1.8 per cent for the first half-year. Our margin remained strong, though fractionally down, as a result of accounting treatments and lagging growth.”  

Lévy conceded, “These figures are not satisfactory by our standards. They are not consistent with what our operations can achieve. As can be seen from our digital growth (+8.8 per cent) or the numerous awards from various juries (Gunn Report, Gartner and an impressive haul of awards at the Cannes International Festival), our strategy is spot-on and our networks are at the cutting edge of the industry. 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.”

“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.

Although 2014 will be a difficult year, it does not undermine our mid-term prospects. Our business plan between now and 2018, as announced on 23 April 2013, is currently being revised to factor in market developments and the investments required reaching our transformation goals ahead of schedule. The strong feedback from our entities leaves us very confident about achieving all our goals,” he concluded. 

It was in May 2014 when Publicis Groupe and Omnicom Group have called off their $35 billion merger. Levy then in a statement mentioned, "The decision to discontinue the process was neither pleasant nor an easy one to make, but it was a necessary one." Experts believe the deal failed majorly because of tax issues.

Four regions contribute to Publicis Groupe’s revenue- Europe excluding Russia and Turkey, North America, BRIC + MISSAT (Mexico, Indonesia, Singapore, South Africa and Turkey), and the rest of the world.

The group says that Europe (excl. Russia and Turkey) remained negative overall (-0.3per cent), while all the other regions reported growth in the first half-year. North America recorded growth of +2.8 per cent, and continues to show resilience.

The BRIC and MISSAT countries achieved growth of +0.4 per cent though the good performances of Russia (+5.9 per cent), Mexico (+10.3 per cent), Turkey (+2.5 per cent) and Singapore (+7.2 per cent) were overshadowed by the Greater China region’s slower-than-expected return to high growth (+1.4 per cent) and by negative growth in Brazil (-0.6 per cent). India’s -14.7 per cent adversely affected the BRIC group. The economic slowdown observed since mid-2013 in emerging countries has had a significant impact on advertising investments. The rest of the world, which includes Australia and Japan, reported growth of +5.6 per cent.

On 30 January 2014, Publicis Groupe acquired a major stake in Indian based advertising agency Law & Kenneth. In an unprecedented move, Law & Kenneth took over the Indian operations of Saatchi & Saatchi and now is called L& K Saatchi & Saatchi. During the first half of the year, the holding company’s BBH India won the creative mandate of Viber (India) and Piaggio Vehicles’ Vespa (India), while Leo Burnett India added MAA TV to its kitty.

Click here to read the financial report

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