Publicis Saw No September Growth as Clients Cut Campaigns

  • Shares fall the most in intraday trading since October 2008
  • CEO Levy says 'unusually large number of clients' downsizing

Publicis Groupe SA, whose ad agencies work for brands such as Samsung, Heineken and Lidl, cut its full-year revenue forecast, saying it recorded no growth in September after a number of clients canceled and postponed campaigns. The shares fell the most in seven years.

Organic sales growth, which strips out effects from acquisitions and currency swings -- and by which the advertising industry judges its performance -- slowed to 0.7 percent in the period, compared with expansion of 1.4 percent in the previous quarter. That’s because of the “unusually large number of clients downsizing accounts” in September, Chief Executive Officer Maurice Levy said in a statement Thursday.

Publicis lowered its organic growth forecast to 1 percent for the year, from a previous estimate of 2.5 percent. The stock fell as much as 10.2 percent in Paris, the steepest intraday decline since 2008, and was down 8.4 percent to 57.21 euros at 11:35 a.m.

“In recent quarters, Publicis has gained a bit of a reputation for missing quarterly guidance,” said Ian Whittaker, a media analyst at Liberum in London. Investors are also likely to compare Publicis’s 0.7 percent growth with peers Omnicom Group Inc. and Interpublic Group of Companies Inc, which posted third-quarter growth of 6.1 percent and 7.1 percent respectively, Whittaker said.

Reported revenue at Publicis, the world’s third-largest advertising company, rose 33 percent to 2.3 billion euros ($2.6 billion) from 1.75 billion euros, the Paris-based company said. That was in line with the average estimate of analysts in a Bloomberg survey.

The company, whose agencies include Saatchi & Saatchi and Leo Burnett, expects organic growth of around 1 percent for 2015 and reiterated targets of double-digit increases in sales and headline earnings per share. Publicis, which gets more than half its revenue from digital operations, bought Sapient Corp. for $3.7 billion a year ago to drive such growth.

For the quarter, Publicis reported a 0.4 percent increase in organic sales from North America. In Europe, the figure rose 0.6 percent and in the Asia Pacific region it gained 4.3 percent, while falling 7.5 percent in Latin America.

This week, the Association of National Advertisers said it has hired two consulting firms to investigate the way media-buying agencies bid for business and ad placement and spend clients’ money. The emergence of digital advertising has spawned “non-transparent” practices among media buyers as they shift away from traditional print and TV ad placements, according to the ANA.

Publicis’ ad agencies won new business during the first nine months of the year from brands including Tesco and Adidas.

Publicis last year abandoned a $35 billion merger with Omnicom Group Inc. that would have created the world’s largest advertising company. The deal fell through after executives clashed over how to run the combined entity and tax and regulatory hurdles created delays.

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