Publicis forced to write off $1.5bn from digital business
Publicis Groupe has taken a knock after the advertising giant was forced to write off $1.5bn (€1.39bn) from its digital business amidst an admission that Sapient, digital marketing specialists purchased for $3.7bn in 2015, would fail to hit their target.
Chief executive Maurice Levy has sought to brush off the devaluation as the symptom of a business plan which was ‘too ambitious’ from the outset after organic growth in the digital business fell short of high hopes at 7%.
Analysts at the time of the 2015 purchase suspected Publicis had overpaid for Sapient when it agreed to a 44% premium to acquire the business, a suspicion which now appears vindicated. At the time of the purchase Sapient had been delivering ‘compound annual revenue growth of 15% between 2010-13’ but this immediately sank into reverse following the takeover.
Organic growth slumped 2.5% in the three months to December, undermined by a 6.9% fall in North America following the loss of several media-buying accounts, including Honda. Commenting on the disappointing figures Levy conceded that the fourth quarter results were ‘pretty bad’ but re-affirmed his belief that ‘very aggressive’ 2018 targets were still within reach.
Publicis Groupe as a whole recorded a €527m loss in 2016 despite revenues rising 1.4% to hit €9.73bn.
Last week it was announced that Nigel Vaz would become Publicis.Sapient’s boss for Europe, Middle East and Asia, with an expanded remit to take on responsibility for DigitasLBi as global president, with Luke Taylor set to depart the business.
Levy is due to step down from his role as Publicis chief on 1 June, to be replaced by the group’s present creative chief Arthur Sadoun, whereupon he will become chairman.