Publicis Groupe’s Fourth Quarter Organic Revenues Miss Expectations, ‘Bumpy’ First Quarter Is Ahead

CEO and chairman Arthur Sadoun looks to 'accelerate' goals in 2019

Publicis Groupe CEO and chairman Arthur Sadoun says organic revenue in the fourth quarter was down due to client budget cuts. Getty Images

At the end of 2017, we asked: Will 2018 mark the end of Publicis Groupe’s financial struggles? It does seem that the year held many bright spots for the holding company.

Still, it’s difficult to buck every negative trend that plagues the industry.

Shares of Publicis in the U.S. fell more than 7 percent on Wednesday after the holding company reported fourth-quarter organic revenue fell 0.3 percent, compared to analyst expectations of a 2.5 percent growth (according to Seeking Alpha). Excluding results from Publicis Health Solutions, which the holding company sold to Altamont Capital Partners late last month, Publicis said its organic revenue was up 0.5 percent—but that’s still a far cry from expectations.

In North America, organic revenue was down 1.1 percent in the fourth quarter. For the full 2018 year, organic revenue was up a mere 0.1 percent overall and down 0.8 percent in North America.

While Publicis said organic growth benefitted from wins in the first quarter (including Campbell’s and Marriott), budget cuts from some of its consumer clients dragged on the results. It also noted that it expects a “bumpy ride” in the first quarter of 2019 due to “client attrition” in the fourth quarter.

“The focus will be on: How do we accelerate our goals for 2019?” Publicis CEO and chairman Arthur Sadoun told Adweek, acknowledging the budget cuts and the need to “improve” in certain areas.

Sadoun said he still considers the results to be “outstanding,” given the “challenging” landscape.

“When you look at our model that combines data, dynamic creativity and technology, we have been winning in 2018 like never before,” Sadoun said, adding that in looking at the operating margin growth of 60 basis points and diluted earnings per share increase of 10.3 percent for 2018, Publicis had “a record year.”

It’s true that on the new business front, Publicis has outperformed its competitors. In January, R3 released a report that found Publicis as the top generator of new business revenue in 2018 over the other agency holding companies thanks to its “Power of One” model, which it has been working to restructure its business around since 2015.

“It’s taken us really four years to bring the Power of One together and break the silos,” Sadoun noted. The model “is why we are winning so many pitches.”

Major wins for Publicis in the fourth quarter include the $1.5 billion GlaxoSmithKline (GSK) media account and $950 million North American media business for Fiat Chrysler Automobiles.

Sadoun said he expects there to be “opportunities” in 2019 to enter media pitches and help clients transform their business, but referencing the trends of 2018, he does not anticipate many creative accounts to come under review. What Publicis considers data, dynamic creativity and technology grew 28 percent last year and now makes up 12 percent of the company’s overall net revenue.

In 2018, Publicis’ net revenue rose 1.1 percent to 9.9 billion euros ($11.3 billion) from the previous year. Net revenue in the fourth quarter grew 0.4 percent to 2.5 billion euros.

Publicis also announced several key hires and promotions. Steve King has been named COO of the group, while retaining his position as CEO of Publicis Media. Nigel Vaz was promoted to CEO of Publicis.Sapient. And Ros King, director of marketing communications at Lloyds Banking Group, was hired as evp of global clients.

@kitten_mouse Lindsay Rittenhouse is a staff writer at Adweek, where she specializes in covering the world of agencies and their clients.