Publicis Has Record Profit on Digital, Fast-Growth Markets
Publicis Groupe SA’s profit rose more than Chief Executive Officer Maurice Levy expected last year as the third-largest advertising company capitalized on U.S. business, digital activities and high-growth markets.
Net income rose 23 percent to a record 737 million euros ($991 million), compared with the average analyst estimate of 677 million euros in a Bloomberg survey. Revenue increased 14 percent to 6.6 billion euros, the Paris-based company said today in a statement. Organic growth, which strips out effects from acquisitions and currency shifts, gained 2.9 percent.
“I’m pleased even with the organic growth after looking at a slowdown in the third quarter; and the fourth-quarter is known as dangerous and we were quite nervous,” Levy said in a telephone interview, adding that earnings had surpassed his expectations. “But all our regions are growing and it’s been extremely good.”
Levy said a contraction last year in Europe, which he called the “sick child of the world,” was countered by sales from emerging markets and digital activities, which now make up about 60 percent of total revenue at Publicis. Though Levy warned that 2013 will be tougher than last year, he expects the company to outperform the market as well as its 2012 figures.
The shares rose as much as 2.5 percent in Paris trading, and were trading 1.6 percent higher at 49.49 euros as of 9:27 a.m. The company has a market capitalization of 10.4 billion euros.
Publicis, which owns the Leo Burnett and Saatchi & Saatchi advertising agencies, will spend between 500 million euros and 600 million euros on acquisitions this year, Levy said.
“We can’t grow if we stay still in the current advertising space,” Levy said. “The world is changing too fast and we need to change faster than the world.”
The company made 21 acquisitions in 2012, most notably of digital advertising agency LBi International, which it bought in September for 416 million euros, and of the U.K.’s Bartle Bogle Hegarty, the agency behind the Johnnie Walker “Keep Walking” campaign and Levi Strauss & Co.’s “Flat Eric.”
Levy said global advertising was expected to grow 4.7 percent in 2012, yet fell below the 3 percent mark. He also said events such as the Euro 2012 football championship and the London Olympics failed to give the industry an expected boost.
Publicis added $3.5 billion in new business during 2012 from clients including L’Oreal SA, Samsung Electronics Co. and Coca-Cola Co. Digital activities made up 33 percent of revenue, while high-growth countries contributed 26 percent to sales.
Organic sales in Europe last year fell 0.3 percent, while in the U.S. growth was 3 percent. Sales gained 10 percent in countries including Brazil, India, Russia, Mexico and Turkey on that basis.
The global advertising industry is predicted to grow by 4.1 percent to $518 billion this year, led by developing markets, Publicis-owned researcher ZenithOptimedia said last month. Internet advertising will increase 15 percent in 2013, while traditional media will grow 1.7 percent, according to ZenithOptimedia.
Levy, who has discussed stepping down from his role at Publicis in recent years, hasn’t given a precise date.
A succession committee has been formed, Levy said in the interview. “The process will take time because on that front we are a slow company because in 87 years of existence we had only two CEOs and the move is something the board wants to take cautiously,” he said.
The company proposed a dividend of 90 euro cents, up 29 percent.
To contact the reporter on this story: Kristen Schweizer in London at firstname.lastname@example.org
To contact the editor responsible for this story: Kenneth Wong at email@example.com