Gideon Spanier
4 days ago

Publicis claims its model is working during Covid as Q3 decline eases to 5.6%

Organic revenue fell in every region, including by 9% in Asia Pacific, although performance was ahead of ad spend forecasts.

Cheers: Publicis Groupe clients include Heineken
Cheers: Publicis Groupe clients include Heineken

Publicis Groupe's Arthur Sadoun claimed its third-quarter performance was “way ahead of what the market expected” as he reported a 5.6% decline in organic revenues as the Covid-19 downturn persisted.

The French agency group's results were ahead of ad spend forecasts, with expenditure expected to be down 10% in the quarter, according to Sadoun, the global chairman and chief executive.

The US held up especially well for Publicis Groupe, with revenues down just 2.4%, which he described as "very, very strong".

Sadoun told Campaign it was "proof" that its “Power of One” model that unites different disciplines such as creative, media, data and digital transformation is working for clients and "we are capturing this revenue pretty well".

He said: "We have an offer that is working." He pointed to North America “where our model is in place”, “where we have invested in Epsilon” (its data business, which Publicis Groupe acquired last year) and "where, starting in Q2, we have delivered the performance that is the best in the industry" compared to the other big agency groups.

Sadoun also credited client wins and retentions such as Kraft Heinz, RB and TikTok

Publicis Groupe, which is the first of the big holding companies to report Q3 results, was also among the best performers in the second quarter during the worst of lockdown, when its revenues fell 13% – behind only Interpublic and better than WPP, Havas, Dentsu and Omnicom. 

"It’s too early to say how we will do compared to our peers in Q3, but with a quarter at -5.6% we are outperforming market adspend expectations at -10%," he said.

Regionally, Publicis Groupe saw improvements in most areas compared to Q2.

Organic revenue fell 9% in Europe, including 10.6% in the UK and 13.8% in France, and 3% in North America, including 2.4% in the United States, its biggest market.

Asia-Pacific organic revenue was down by 9.2%, weighed down by a 8.6% decline in China. The Groupe also said it is has a higher proportion of automotive clients in APAC compared to the rest of the world.

“Epsilon played a vital role for the overall offering,” the company said. “It also contributed to US organic growth as a stand-alone entity, by being flat over the quarter despite its exposure to US automotive and small non-food retail industries.”

Data services also held up well for several rivals including Dentsu’s Merkle in Q2. Asked about the impact of Epsilon, Sadoun said, “there is a direct, positive impact on organic growth but the ‘halo effect’ is way bigger” as it has helped on several big pitches.

In another sign of relative financial health, Sadoun told Campaign salary reductions have ended for higher-earning executives at Publicis Groupe after six months.

He said: “Thanks to our model, we are mitigating the revenue decline we are experiencing due to the pandemic. As our clients continue to accelerate their investment into digital channels, ecommerce and direct-to-consumer, we are able to capture part of that shift, thanks to our offer combining our leadership in creative and media, with unrivalled capabilities in Epsilon and Publicis Sapient [with the Power of One].

“And, as we continue to roll out our model to our client base, it is encouraging to see that our performance with the top 200 clients is slightly positive for the first nine months of the year.”

Sadoun said Publicis Groupe had three “structural advantages” over rivals: its “global delivery centres”, including 16,000 people in India; its country model, which means it combines agency disciplines in one P&L; and internal platform Marcel, which lets staff collaborate and find work at other agencies in the group.

Sadoun warned he remained “overly cautious” about the outlook “for a single reason – because the virus is coming back”.

He is "trying not to look too much" at Q4 in isolation "and instead focus on continuing to build an offer and an organisation to fight for our clients and our people in this challenging time, and get recovery ready".

Analysts at Citigroup said of the Q3 results: “It is increasingly clear that Publicis is performing materially better than most expected.”

Paul Richards, analyst at Dowgate Capital, said it was “a decent result” – “though clearly the resurgence of Covid-19 has led to the group to caution for Q4”.

Publicis Groupe's share price slipped as much as 3% following the results, on fears about the Q4 outlook.

 

Source:
Campaign UK

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