Publicis hikes full-year guidance after ‘extremely strong result’ for first half of 2022
Publicis Groupe, the French holding company behind agencies such as Saatchi & Saatchi, BBH and Leo Burnett, has hiked its full-year growth guidance on the back of strong results for the first half of the year.
Publicis has announced record results during the second quarter of 2022 / The Drum
Outright organic growth in the second quarter was 21%, with net revenue growing 19.1% across the first half of the year, compared to the same period in 2021.
Chairman and chief executive of the group Arthur Sadoun said the results represented an “all-time high on all KPIs,” despite economic headwinds in China and the United States, and the impact of the war in Ukraine.
The company has since updated its guidance to investors, and now expects to see organic growth over the whole year of 7%.
“These extremely strong results ... combined with our better visibility on a solid H2 and the strength of our model, make us confident for the future,” said Sadoun.
The optimistic guidance came as the IPA Bellwether reported that ad spend growth for the next four years was predicted to slow as it slashed its budget forecasts.
The same morning (July 21) Sir Martin Sorrell issued a profit warning to investors. Despite steady revenue and gross profits, it said its operating costs could outstrip those gains. A hiring freeze and group-wide cost-control programme is now in place.
What do the results show?
Net revenue for the second quarter was €3.07bn and €6.54bn for the second half. Its earnings before interest, tax, depreciation and amortization (EBITDA) grew 22.3%, while its operating margin grew to just over €1bn, an increase of 24.9% compared to 2021.
According to Sadoun, the performance comes down to “very solid growth across all regions,” with the US and Europe both seeing over 10% growth, and Asia Pacific and China seeing positive growth despite the impact of lockdowns in the latter country.
He credited “further acceleration at Publicis Sapient and Epsilon, which grew 19.1% and 13.7% respectively, confirming our ability to capture the shift of client investment toward data, technology and digital business transformation” with helping its bottom line, and also pointed to an influx of new business, at the expense of rivals. “Our momentum since the beginning of the year continues to place us at the top of the New Business rankings for the past 12 months, in the latest broker reports,” he told investors.
Publicis agencies brought in accounts for L’Oréal, BNP Paribias, Toyota and Heineken in the last three months.
While the company has seen a small increase in labor costs since last year (1.8%), it’s not been unduly affected by higher wage bills. Chief financial officer Michel-Alain Proch told analysts on an investor call that the group had recruited 7,000 new staff in the first half, with around 3,500 of those being added to its ’global resource center’ of staff able to be deployed remotely. Hiring would likely slow down in the near future, he added. ”We will be slowing down the pace of this recruitment. We’ll be focusing on our tech and data jobs and our global delivery centre and using less freelancers,” Proch said.
Other companies, such as S4 Capital, have suffered from the impact of a larger cost base following last year’s hiring frenzy.
The chairman said the results meant Publicis was in a secure position, ahead of the ”cloudy” economic environment expected later this year. Sadoun said: “Looking ahead, we are ready to face the ongoing uncertainties caused by the macro-economic context, thanks to our unique capabilities to help our clients weather any potential challenges and by leveraging our agile platform organization to sustain industry-high financial ratios.”
Which territories and areas of the business performed best?
The Middle East and Africa and Latin America saw the most growth among Publicis’s territories, with 15.3% and 20.7% respectively. North America and Europe, the company’s core markets, enjoyed 10.3% and 10.1% organic growth in the second quarter; net revenue in North America was up 25.2% in Q2.
Publicis Sapient and media agency performance meant that, “despite lockdowns in several cities, China was positive ... and India, Australia and New Zealand were up strongly,” the company’s finance statement said – in contrast to American rival Omnicom, which experienced negative growth in Asia Pacific during the same period.
Sadoun himself highlighted the contributions of Sapient and Epsilon to the group’s results.
On the back of its positive results, Publicis has updated its guidance to investors and the stock market. It now expects organic growth for the full year to reach 6-7%, its operating margin to reach 17.5-18% and cash flow to hit €1.5bn.