Publicis Boosts Growth Target, Asserts Market Leader StatusBy
Ad group seeking to draw distinction with bigger rival WPP
Industry faces cuts from major advertisers and new competition
Publicis Groupe SA, the world’s third-largest advertising company, lifted its outlook for growth on the conviction that it’s the best placed to triumph over structural changes in the industry.
“We believe that we are the only ones who have the right assets to succeed,” Publicis Chief Executive Officer Arthur Sadoun said in an interview ahead of an investor presentation Tuesday in London. “We have a positioning that we think is the right one: be the market leader in marketing and business transformation.”
Agencies are battling cutbacks by major advertisers like Unilever Plc and the rise of consultants like Accenture Plc and Deloitte LLP, which are becoming experts in shifting businesses online. Investor concerns about the trends were fueled this month when WPP Plc, the largest ad group, lowered its long-term profit outlook, triggering sell-offs for peers including Publicis, Omnicom Group Inc. and Interpublic Group of Cos.
Paris-based Publicis said it’s aiming to achieve organic revenue growth of 4 percent by 2020, driven partly by acquisitions, and plans to cut out 450 million euros ($555 million) of costs to boost profit margins. That compares with the company’s 2017 rate of 0.8 percent for organic growth, which strips out effects from acquisitions and currency swings.
The stock initially jumped 3.2 percent on an outlook seen as unexpectedly bullish by analysts including at Barclays. The shares fell 0.7 percent to 58.70 euros at 11:15 a.m. in Paris.
“The key question is whether investors will believe these targets, especially as they are largely based on M&A,” Barclays analysts led by Julien Roch wrote in research note. The guidance translates into annual earnings per share growth of 7 percent to 9 percent after mergers and acquisitions, according to Barclays estimates. WPP has an EPS growth target of 5 percent to 10 percent annually, though investors don’t believe WPP’s targets, the analysts wrote.
Publicis, home to agencies such as Leo Burnett and Saatchi & Saatchi, is in a good position to respond to the threat of Accenture and help customers transform their businesses digitally because it has been investing in its own consultant offering, Sapient, Sadoun said. Publicis agreed to buy Sapient for $3.7 billion in 2014.
“The question is: who has been transforming fast enough to still be relevant today?” Sadoun said. “While some are losing revenue because of the difficulties of some clients or some transformation, we are actually increasing this.”
The investor day will seek to “regain the trust in the name of the industry,” Sadoun said. “It’s about showing the world there is a way for a group like Publicis to be an indispensable partner.”
Publicis shares had declined 6.2 percent over the last year before Tuesday, compared with a 32 percent drop for WPP.