UPDATE: Publicis 2Q Organic Revenue Drops; Sees 3Q Improving
July 23 2009 - 2:13AM
Dow Jones News
French advertising company Publicis Groupe SA (PUB.FR) Thursday
said organic revenue continued to drop sharply in the second
quarter as advertisers tightened budgets, but Chief Executive
Maurice Levy expects the group's figures to improve in the third
quarter as the global advertising market should hit bottom in
August at the latest.
Paris-based Publicis, the owner of Saatchi and Saatchi, said
organic revenue, a closely watched metric in the advertising
industry that strips out acquisitions, disposals and currency
movements, was down 8.6% in the quarter ended June 30.
This figure was greater than an average organic revenue drop of
7.9% forecast by six analysts polled by Dow Jones Newswires.
In a press briefing with journalists, Levy said he still aims
for the company's organic growth to outperform the overall
advertising market decline this year and that the company's results
should start improving in the next quarter.
"All figures should be less in decline in the third quarter than
in the second quarter," he said, adding that a gradual improvement
from the third quarter onwards should result in a return to organic
growth for the group mid-2010.
Publicis unit ZenithOptimedia currently predicts global
advertising spending will decline 8.5% in 2009.
Revenue for the second quarter was EUR1.13 billion, down from
EUR1.17 billion in the same period last year, but slightly above
analysts' forecast of EUR1.12 billion.
Organic revenue slid 16% in Europe in the second quarter while
North America was down only 3.8%.
"The particularly bad 2Q organic revenue decline in Europe is a
bit surprising but North America is very good," Kepler Capital
Markets analyst Conor O'Shea said. He rates Publicis buy.
Without the impact of General Motors Co.'s bankruptcy filing,
Publicis' organic revenue would have been down 5.4% in the first
half, instead of 6.6%, the group also said.
Publicis on Tuesday said it expects a maximum EUR9 million
exposure to GM's bankruptcy filing, much lower than its previous
estimate of EUR55 million, and that it would continue to work with
the new GM. GM is one of Publicis biggest clients.
Net profit for the first half fell 13% to EUR167 million, from
EUR192 million last year due mainly to the drop in revenue.
Analysts had forecast net profit of EUR156 million.
Operating profit in the first half was EUR287 million, down from
EUR334 million last year, giving the company an operating margin of
13%, compared with a margin of 15% in the same period last
year.
This just about met the expectations of analysts, who had
forecast operating profit of EUR283 million and a margin of
13%.
New business in the first half was $3.2 billion.
Levy said Publicis continues to focus on cost-cutting to
preserve margins and that the group should return to its record
operating margin levels in about two to three years.
Publicis shares closed Wednesday at EUR22.01. The stock has
gained about 20% since the start of the year as analysts believe
the group is more resilient to the downturn than smaller rivals
because it has stronger negotiating power on large accounts and a
good position in digital advertising.
The group, which competes with Martin Sorrell's WPP PLC
(WPP.LN), and U.S.-based Omnicom Group Inc. (OMC) and Interpublic
Group of Cos. (IPG), is the first of the world's large advertising
holding company's to report second-quarter results.
Company Web site: www.publicisgroupe.com
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 40;
ruth.bender@dowjones.com