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Publicis Groupe shares down in shock earnings announcement

Publicis Groupe has seen its shares hammered overnight following a poor second quarter financial performance.

The second quarter results surprised the market with a reported 2.1% fall in organic revenues that saw its Europe, North America and Asia Pacific regions all reporting falls. 

Publicis was immediately punished by investors with the stock falling 10% on the Paris stock exchange. The group’s woes affected the valuation of its competitors with rival WPP Plc falling 3.8 percent on the London market while Omnicom – which lost nearly 10% earlier in the week following its own poor results – declined over 1% in New York.

The Asia Pacific region overall saw its net revenue decline by 15.2 % and its organic growth drop 3.3% over the period. Singapore and China offset the poor Australian results with a 6.3% and 0.4% gains respectively.

CEO Arthur Sadoun blamed the disappointing global results on GDPR implementation costs in Europe and the US healthcare business, telling the market: “We saw a slowdown from our good first quarter of +1.6% to a second quarter at -2.1%, mostly due to two conjunctural challenges – tougher basis of comparison and uncertainty relating to GDPR implementation impacting our net revenue in Europe – but also to one specific operational bump with our volatile health sales representatives business in the US.

Sadoun blamed a number of factors

“This bump represents the biggest share of our negative growth as the overall impact of our Publicis Health business was around 30 million euro.

“Despite the environment, we showed a 60 basis point margin improvement and 40 basis points on a comparable basis at constant restructuring charges. This 40 basis point expansion actually includes +70 basis points thanks to cost savings and investment in our game changers representing 30 basis points.

“These reflect two important points: first, we are making progress in delivering on our efficiency plan, demonstrating our ability to reduce costs while providing more high value products and services to our clients. Second, we are investing in our key strategic capabilities to build the growth of the future.”

Earlier this year, Publis unveiled the first draft of its Marcel artificial intelligence platform which forms a key part of the digital transformation  of its strategic capabilities. The platform aims to give the organisation’s 80,000 employees access to the group’s global resources.

In the longer term, Sadoun said Publicis Groupe intends to deliver greater value to shareholders by through accelerated organic growth, improved margins and bolt-on acquisitions.

The company also committed to increase its operating margin by 30 to 50 basis points per annum between by 2020, underpinned by a 450-million euro cost savings plan.

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