Publicis Chief Levy Sees Clear Improvement in 2017; Shares Riseby
30 years at the helm of ad firm, Levy plans to step down
Brexit impact won’t be heavy, U.K. to stay second-biggest unit
Publicis Groupe SA Chief Executive Officer Maurice Levy, working through a period of contract cancellations at the French advertising firm, predicted better results through 2017, when he hands the baton to a new leader after three decades. The stock rose the most in a quarter.
Business will “clearly improve” next year compared with 2016, Levy told reporters at a briefing as the company reported second-quarter revenue that matched analysts’ estimates on Thursday. While revenue increased, the Paris-based owner of Leo Burnett and Saatchi & Saatchi is still affected by clients canceling and postponing campaigns last year.
"The third quarter will be the most affected by contracts lost last year," Levy said. "Organic growth will be weak in the third quarter, but it won’t be a negative number."
Levy, CEO for more than 30 years, is 74 and plans to step down next year. His successor will probably be announced between December 2016 and February 2017, he said.
The U.K. will remain the company’s second-biggest market, despite the vote to leave the European Union, and the impact on the group won’t be heavy, Levy said. Leaving the EU could cost the U.K. 1 billion pounds ($1.32 billion) in lost advertising spending through 2030 because of a reduction in economic growth, media-buying agency ZenithOptimedia said last month, before the June 23 referendum in Britain over EU membership.
"We don’t know what the impact on the British economy will be,” Levy said. "I don’t think there will be a big impact with a significant decrease in GDP.”
Publicis rose as much as 4.3 percent, the steepest intraday advance since April 19, and was up 4 percent to 66.79 euros at 9:24 a.m. in Paris.
The French company warned in April that it would feel the effects from the loss of several media-buying accounts during the second and third quarters of 2016. Publicis, whose advertising agencies work for companies including Renault SA and Nestle SA, lost ad space purchasing business with Procter & Gamble Co. and Coca-Cola Co. in the U.S. in the past year.
Boosted by European business, sales rose 0.9 percent to 2.46 billion euros ($2.7 billion) in the second quarter, the Paris-based company said in a statement. Organic growth, which strips out effects from acquisitions and currency swings, was 2.7 percent, lifted by advances in digital business and good performance in health care.
Thursday’s results from Publicis are “encouraging,” Charles Bedouelle, an analyst at Exane BNP Paribas, said in a note to clients. Combined with “bullish comments” about the future “it seems the new organization is delivering, arguably faster than we thought.” Growth at the company was almost in line with its peers for the second quarter in a row, compared with marked underperformance before, he said.
Organic growth in the quarter was 7.3 percent in Europe and 5.5 percent in the Asia Pacific region. In North America, sales declined 0.1 percent.