Publicis Revenue Beats Estimates on Stronger Dollar, Pound

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Publicis Groupe SA, the owner of advertising agencies including Leo Burnett and Saatchi & Saatchi, said second-quarter sales rose 39 percent, beating analysts’ estimates, lifted by its digital unit and a stronger dollar.

Revenue was 2.44 billion euros ($2.7 billion), the Paris-based company said in a statement. That beat the 2.34 billion-euro average estimate of analysts in a Bloomberg survey. Organic growth, which strips out effects from acquisitions and currency swings -- and by which the ad industry judges its performance -- rose 1.4 percent, helped by digital operations.

The stock rose 0.8 percent in Paris to 72.66 euros on Thursday at 9:20 a.m., giving the company a market value of 16.2 billion euros.

Chief Executive Officer Maurice Levy said digital activities now account for more than half of the company’s revenue and that Publicis will deliver double-digit increases in operating margin, headline earnings per share and sales for 2015.

Publicis, which bought Sapient Corp. for $3.7 billion in November to drive digital growth, is reviewing how it operates in light of “more sophisticated” demands from clients and following the acquisition, Levy said last month. He said Wednesday that Sapient’s integration is slightly ahead of schedule and that organic growth at the company will continue to rise in the second half of this year.

New Team

In September, Levy appointed a new management team to pave the way after he steps down in 2017. The team’s top executives are Publicis Worldwide CEO Arthur Sadoun, Starcom MediaVest Group CEO Laura Desmond, ZenithOptimedia CEO Steve King and chief strategist of the group, Rishad Tobaccowala. Alan Herrick, the CEO of Sapient, also joined after Publicis bought his company.

Publicis reported a 57 percent increase in second-quarter sales from North America, partly due to currency fluctuations, to 1.32 billion euros. In Europe the figure rose 23 percent and in Asia Pacific it gained 28 percent.

With over 50 percent of second-quarter sales exposed to the dollar and pound, exchange rates had a 263 million-euro positive impact on sales, corresponding to 15 percent, Publicis said.

Free cash flow before changes in working capital requirements should exceed 1 billion euros for the first time this year, Levy said.

Executives Clashed

Publicis ad agencies won new business during the first half from brands including Tesco Plc, Toyota Motor Corp. and Viacom Inc. The company last year abandoned a $35 billion merger with U.S. peer 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.

U.K. rival WPP Plc said last month that 2015 looks to be another demanding year. In the first four months of 2015, the world’s largest advertising company reported an 8 percent rise in sales to 3.8 billion pounds ($5.9 billion).

(Updates with share reaction in third paragraph.)
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