Publicis Groupe has announced its Q2 earnings; the France-based advertising agency holding company warned the next quarter is going to be “difficult.”
Sales rose 0.9% to 2.46 billion euros ($2.7 billion), while organic growth — which is the measure the industry usually uses to measure success as it strips out the effects of acquisitions and currency fluctuations — was up 2.7%.
Publicis Groupe’s consolidated revenue for the second quarter of 2016 was 2.462 million euro, up 0.9% from 2,439 million euro in Q2 2015. Exchange rates impacted revenue negatively by 85 million euro, i.e. the equivalent of 3.5% of Q2 2015 revenue. Net acquisitions contributed 44 million euro in revenue in Q2 2016, the equivalent of 1.8% of Q2 2015 revenue. Growth at constant exchange rates was +4.6%.
Organic growth was +2.7% in the second quarter, buoyed by the growth of digital activities (+5.1%). Development efforts allowed to significantly mitigate the impact of the loss of media accounts of 2015. However, the impact of these losses should be much greater in the third quarter.
Over the first half-year, Publicis Groupe’s consolidated revenue totaled 4,753 million euro compared with 4,542 million euro in 2015, i.e. an increase of 4.6%. The impact of exchange rates was a negative 105 million euro, i.e. the equivalent of 2.3% of H1 2015 revenue. Net acquisitions contributed 191 million euro to revenue in the first half of 2016, i.e. the equivalent of 4.2% of H1 2015 revenue. Growth at constant exchange rates was +7.1%, and organic growth stood at +2.8% for the first half of 2016. It should be noted that the Healthcare sector performed well, and that the Media business continued the sustained momentum built up in Q1 2016 despite the impact of the accounts lost in 2015.
Europe grew its revenue by 6.3%. When the impact of acquisitions and exchange rates is factored out, organic growth was +5.5%. Over the entire region, digital achieved strong growth (+12.5%). France continued to perform well (+5.0%) and Germany and Italy continued their strong momentum (growth in the region of 9%), shored up by better economic situations. The situation was volatile in Russia with 4.6% growth at June 30, after 9.4% in the first quarter. The situation is much improved in the UK where growth was 3.6% in H1 (7.4% in Q2).
North America reported growth of 5.9% with organic growth standing at +1.4%. This growth stemmed mainly from the media and health businesses. Growth was nevertheless impacted by the 2015 media account losses (Mediapalooza). Asia Pacific achieved reported growth of 3.5% and organic growth of 4.7%, with good levels of performance in Greater China (+4.4%).
During the first six months of 2016 Publicis Groupe implemented the most fully integrated organization in the entire sector, bringing down the curtain on the traditional holding company structure with siloed communications groups. For Publicis Groupe, the goal is to help clients by providing them with the means to succeed in their own transformation and optimize marketing performance through access to all of the Groupe’s capabilities across the “Power of One” organization.
Commenting on the results, Maurice Lévy, Chairman and CEO of Publicis Groupe said, “This first half-year has ended very satisfactorily. First with the results: organic growth of close to 3%, an operating margin at 13% and a double digit increase of our free cash flow. Next the implementation of our new structure, the “Power of One” by the end of June, as expected. The transformation process launched in December 2015 has completely changed our approach to communications and our understanding of the way our clients work in taking on the challenges of the future. This transformation means we can anticipate our clients’ expectations with an “end-to-end” offering that provides them with full access to the Groupe’s resources including our skills in consulting and technology.”
“I would like to express my gratitude to all our people who have had to contend with We should not be heavily impacted from the Brexit. Since we operate in the UK in local currency, as we do in all the countries in which we have operations. We remain very confident about reaching our 2018 objectives, and believe that we will start to see and feel the benefits of our transformation more fully as of 2017,” he added.