Publicis CEO Levy Forecasts Ad Recovery in China, India

Publicis Groupe SA Chief Executive Officer Maurice Levy forecast advertising demand in emerging markets, which caused a shortfall in revenue last quarter, will begin to recover this year.

The French advertising company, which is merging with Omnicom Group Inc., reported a 1.5 percent increase in fourth-quarter sales to 1.9 billion euros ($2.6 billion), trailing analysts’ average estimate for about 2 billion euros. Stripping out acquisitions and currency swings, revenue rose 0.7 percent.

“It is a very temporary situation which will not have any impact on our growth strategy for the future,” Levy said an in an interview with Bloomberg Television. “It’s a blip of a cloud which has little consequence for the future.”

Publicis shares rose as much as 2.6 percent and traded 2 percent higher at 67.05 euros at 10:11 a.m. in Paris, giving the company a market value of 14.3 billion euros. Ad demand will probably pick up in China in the second quarter, in India in the second half of the year, and in Brazil starting in June when the country hosts soccer’s World Cup, Levy said.

Publicis, whose ad agencies include Leo Burnett and Saatchi & Saatchi, said its heavy weighting in the luxury industry meant it had greater exposure to the market. The company said it remains ahead of its 2018 plan.

Publicis, which is merging with Omnicom to form the world’s biggest advertising company, said approval from Chinese regulators has been delayed to the end of the first half this year, after receiving clearance in all other jurisdictions including the U.S. and Europe. The companies initially expected to merge in the first quarter of 2014.

Operating Margin

Publicis last year outlined a five-year plan to target an operating margin of 18 percent to 20 percent by 2018, from 16.1 percent in 2012. The Paris-based company today reported a 16.5 percent operating margin for 2013.

Revenue last year was 6.95 billion euros, an increase of 5.2 percent from the year prior. Net income for 2013 was 792 million euros, beating the 763.8 million-euro estimate by analysts in a Bloomberg survey.

Omnicom reported fourth-quarter revenue on Feb. 11 of $4.1 billion and net income of $300.5 million. The company’s shares fell 0.2 percent to $72.87 at the close in New York.

Publicis and New York-based Omnicom have said a merged company will offer clients integrated campaigns and advanced technology while helping contain costs at the companies. Shareholders in the two companies will each hold about 50 percent of the new entity, Publicis Omnicom Group.

The alliance will also give the owners more clout to negotiate better ad rates for their clients for media placements on television, the Internet and in print as the advertising industry starts showing signs of a recovery.

Merger Questioned

Industry peers from WPP Plc to Japan’s Dentsu Inc. have questioned the logic behind the merger and said they are picking up disgruntled customers who fail to see how it benefits them.

Publicis said revenue in Europe for 2013 rose 9.5 percent, by 5 percent in North America and by 2.9 percent in emerging markets such as Brazil, India and China.

Digital activities at Publicis accounted for 38.4 percent of revenue in 2013 and generated 40.4 percent of sales in the fourth quarter, Publicis said.

New business for the year totaled $4.5 billion from clients including Dunkin’ Donuts, Pfizer and Carlsberg.

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