Publicis Groupe called its third quarter earnings announcement early to tell the market that its full year revenue growth with be worse than anticipated.
The French advertising giant says its organic revenue will be a negative 2.5% for the year rather than flat at 0.7% as previously forecast.
The company's shares fell 14.5% in Paris to EUR36.35.
Market analysts say Publicis has struggled with its own company-specific issues with organic growth falling below the other holding companies.
In the third quarter, Publicis says it suffered from cuts from a handful of traditional advertising clients in FMCG/retail mainly in the US, and tough competition in media operations.
The company, with global brands such as Leo Burnett and Saatchi & Saatchi, is also feeling the pain of restructuring to meet a changing advertising environment.
Publicis has been investing, including multi billion dollar acquisitions, to take on digital competitors.
The company paid $US4.4 billion earlier this year to buy of data marketing business Epsilon.
In 2015 Publicis paid $3.7 billion for Boston-based digital network Sapient to create a digital platform.
But the integration of creative and technology has been labelled a “nightmare” by Arthur Sadoun, chairman and CEO.
Analysts at MoffettNathanson Research say they don’t believe the result is a harbinger of bad news for the rest of the big global agencies.
“We’ve seen this movie before, and do not believe that Publicis’ poor results necessarily reflect worsening trends for the other agencies,” they write in a note to clients.
“In fact, we are maintaining our organic growth estimates for WPP, Omnicom and Interpublic for the quarter.
“Over the past several years, Publicis has struggled through its own company-specific issues with organic growth falling below its peers.”
MoffettNathanson expects third quarter industry growth to be +1.2%, excluding Publicis, but just +0.5% including Publicis.
The analysts say Publicis has called out FMCG/Retail attrition since the fourth quarter of 2018 without subsequent blowback on other agency results.
MoffettNathanson forecasts on organic growth among the big four:
Publicis, despite its weaker organic growth forecasts, is confident of increasing operating margin rate by 0.3 of a percentage point to 17.3% in 2019. It also expects to grow headline earnings per share by 5% in 2019.
For 2020, Publicis is expecting organic net revenue to range between -2%, if current trends persist, and +1%.
Publicis says the cost of transition is hurting short-term organic growth with a below expectations third quarter organic growth of negative 2.7%.
Arthur Sadoun, chairman and CEO, says Publicis is disrupting traditional operations with data and technology thanks to the acquisition of Sapient and Epsilon to deliver personalisation at scale.
“We have streamlined and simplified our organisation to seamlessly connect creativity, media, data and technology,” he says.
“Now we are focused on executing our strategy, and there are already concrete signs that make us confident for the future.”
He says an increasing number of clients have seen in in the Publicis model the solution for transformation.
Major account wins in the third quarter included Novartis, Mondelez, British Telecom, and luxury goods group LVMH.
“The combination of our data and tech capabilities has played a critical role in this, especially in the US where we were able to bring together our leadership position in media with Epsilon’s unmatched deterministic, behavioral and transactional data, powered by AI.
“We are shifting the Groupe’s revenue profile, thanks to the integration of Epsilon which is enhancing reported growth to double digits while considerably improving our data offering.”
Publicis’ game change businesse represent 14% of revenue and are growing organically by 21%.
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.