Publicis Groupe Q4 net revenue at €2,492 mn amid attrition in advertising in the US

Publicis Groupe has reported net revenue of €2,492 million in Q4 2018, up 0.4 per cent from €2,483 million euro in 2017. Net acquisitions contributed €11 million to net revenue in Q4 2018 (including the deconsolidation of Genedigi from January 1, 2018). At constant exchange rates, growth was +0.2 per cent after inclusion of the positive impact of exchange rate variations (€5 million or +0.2 per cent). 

Organic growth was -0.3 per cent in Q4 2018. Publicis Groupe made effective the disposal of Publicis Health Services (PHS) in January 2019. This entity services CSOs (Contract Sales Organizations), a business that does not exist in other healthcare communications networks that mainly specialise in outsourcing. When PHS is factored out, growth was +0.5 per cent in the fourth quarter. Growth was, therefore, slower than in Q3 due to negative impact of the usual year-end volatility and the higher-than-expected rate of attrition in the traditional advertising business, notably in the FMCG sector in the US. Organic growth nonetheless benefited from the ramp-up of accounts won in Q1 2018 – notably those of Daimler, Carrefour, Campbell’s and Marriott – which contributed 150 basis points. 

For the full year 2018, Publicis Groupe’s net revenue was €8,969 million, compared with €9,332 million in 2017, that is, a 3.9 per cent decrease. At constant exchange rates, growth was +0.1 per cent, but the actual impact of exchange rate variations was a negative 4.0 per cent or €374 million. Net acquisitions contributed €5 million to net revenue in 2018 (including the deconsolidation of Genedigi from January 1, 2018). 

Organic growth was +0.1 per cent in 2018. It was +0.8 per cent without PHS. This includes 28 per cent growth of net revenue from the Strategic Game Changers, that is, an organic contribution to net revenue of close to +€240 million, but also the €150 million impact of attrition. 

Calling 2018 a productive year for Publicis, Arthur Sadoun, Chairman and CEO, Publicis Groupe, said, “We are posting a record year, both commercially with a disproportionate share of new business wins, and financially with the highest EPS ever.” 

According to Sadoun, there are four key highlights of 2018 – new business, financial performance, organic growth and transformation. Speaking on the group’s new business wins in the year gone by, he said, “We won the majority of the biggest pitches of 2018, such as Daimler, Campbell’s, Marriott, Carrefour, Cathay Pacific, Smucker’s, GSK and Fiat-Chrysler. These last two wins represent more than $1 billion in billings each.” 

At the same time, the group suffered from the usual year-end volatility and the higher-than-expected attrition in traditional advertising at €150 million, mainly from several FMCG clients in the US. “This is a broad industry challenge as competitors, our clients themselves, and the press have been saying. We are taking strong actions to overcome it,” Sadoun added. 

He further said, “We confirm the 4 per cent organic growth objective in 2020, and the 30 to 50 basis point margin improvement both in 2019 and 2020.” 

Outlook for 2019 

Publicis Groupe has begun 2019 with optimism even though the group expects a bumpy ride in the first quarter due to the prolonged effects in the first months of the year of the FMCG client attrition of Q4 2018. However, the ramp-up of the significant accounts won towards the end of 2018 should lead to improved organic growth as of the second quarter. 

After very good performance in 2018, Net revenue from the strategic game changers is expected to continue to grow fast in 2019. At the same time, group expects relatively high attrition in 2019, which should cause higher volatility of its quarterly organic growth. Publicis Groupe expects the organic growth in 2019 to accelerate, compared with 2018.