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PARIS, Feb 9 (Reuters) — France’s Publicis reported weaker-than-expected underlying sales in the last quarter of 2016, closing a challenging year that led it to write-down the value of its digital business.
The world’s third-largest advertising group, which underwent an internal reorganisation to foster greater collaboration between its myriad of agencies and win back big clients it lost in 2015, will see its veteran chief executive Maurice Levy, 74, hand over the reins of the group to 45-year-old Arthur Sadoun in June.
Fourth-quarter revenue amounted to 2.67 billion euros ($ 2.85 billion), reflecting an underlying drop of 2.5 percent compared with the same period a year earlier, as the market conditions in North America, Publicis’ number one region in sales, worsened over the three-month period ending in December.
A Reuters poll had forecast an underlying sales drop of 0.63 percent over the period.
$ 3.7 billion acquisition of Sapient in 2015 leads to a writedown
Full-year earnings were also impacted by 1.44 billion-euro ($ 1.54 billion) non-cash depreciation charge, essentially for the group’s digital division Publicis.Sapient, resulting in a net loss of 527 million euros. Publicis Groupe purchased US-based digital marketing specialist Sapient in 2015 for $ 3.7 billion.
In a briefing with reporters, Levy said Pubicis Groupe paid a 44% premium for Sapient and admitted: “We had a business plan that was probably too ambitious,” MarketWatch reported.
The business unit’s assets and financial forecasts had to be revised, following the weaker performance of Razorfish, the digital marketing agency that Publicis acquired in 2009.
Still, Levy confirmed the targets he set out under the group’s strategic plan for 2018, including a yearly operating margin in the range of 17.3 to 19.3 percent. Last year, Publicis’ operating margin stood at 15.6 percent.
“It’s true that we are running behind by a year (on that plan),” Levy told reporters. “It’s clear that it’s a little bit more difficult … but it’s not unachievable,” he added, referring to the 2018 targets.
Levy also said that the challenges Publicis faced in 2016 will probably continue to weigh on sales in the first half of 2017. The group should see its underlying sales growth return to market average in the second half, he added.
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