UPDATE: Publicis Upgrades 2010 Outlook As Ad Recovery Gains Pace
29 Juli 2010 - 1:39PM
Dow Jones News
French advertising company Publicis Groupe SA (PUBGY) Thursday
raised its full=year outlook after posting better-than-expected
second quarter earnings, in a further sign that the pace of the
advertising market recovery has accelerated.
"Even if we don't know for sure that the crisis is over and
despite some worries about sovereign debt and public spending,
there is a strong feeling that we have reached the end of the
crisis," said Chief Executive Maurice Levy.
Publicis now expects organic revenue to grow more than 3.5% in
fiscal 2010, in line with projections for the global advertising
market from its unit ZenithOptimedia, Chief Executive Maurice Levy
said in a briefing with reporters.
Publicis, which owns the Saatchi and Saatchi advertising
network, previously said it aimed to post organic revenue growth of
around 3% but the improvement in advertising markets seen over the
past months has given the group confidence to raise its guidance,
according to the CEO.
Levy said growth has been driven both by winning new budgets and
an increase in existing clients' budgets. "Almost all of our thirty
biggest clients have increased their advertising spending," he
said.
Publicis, whose clients include Procter & Gamble Co (PG) and
carmaker Renault SA (RNO.FR), said it won net new business worth
$2.1 billion in the first half.
Publicis's better-than-expected results, together with strong
results at French market research group Ipsos SA (IPS.FR), provides
bullish read-across for advertising agencies, Exane BNP Paribas
said in a note to investors. At 1048 GMT, shares in WPP PLC
(WPP.LN), the world's largest advertising and marketing group by
revenue, were trading up 1.6% to 687 pence while Aegis Group PLC
(AGS.LN) shares were up 1.7% to 119 pence.
Publicis shares gained 0.7%, only slightly outperforming a 0.5%
rise in the CAC-40, as most analysts had expected the group to be
upbeat.
Exane noted that the group's new organic revenue growth guidance
of 3.5% is conservative as it implies only 2% growth for the second
half.
Yet in another sign that the advertising market is recovering,
Aegis Thursday launched a A$363 million friendly takeover bid for
Australia's Mitchell Communication Group Ltd. (MCU.AU).
Publicis CEO Levy also sounded a more optimistic tone with
regard to the company's margin, which he said is likely to be
higher than 15% this year. So far, Publicis had targeted for its
operating margin to be flat at 15% this year, an outlook analysts
say was conservative.
"We consider the margin we posted last year to be a floor," Levy
said.
In the second quarter, Publicis posted organic revenue growth of
7.1%, another improvement from the 3.1% posted in the first
quarter, albeit on a lower comparison base. This was better than
the 5.6% forecast by six analysts polled by Dow Jones
Newswires.
Organic revenue growth is a key metric in the advertising
industry that strips out currency fluctuations, acquisitions and
disposals.
On a reported basis, revenue in the quarter rose 21% to EUR1.38
billion from EUR1.13 billion a year ago, as all regions, except the
Middle East and Africa, returned to growth. Revenue was also
boosted by favorable exchange rates, notably the higher U.S. dollar
compared to the euro. Analysts had expected revenue of EUR1.28
billion.
Net profit for the first half of the year totaled EUR213
million, up from EUR167 million in the same period last year, and
above analysts' expectations of EUR194 million.
Operating profit in the same period rose 29% to EUR369 million,
while analysts had expected operating profit of EUR328.6 million.
This gave the company a margin of 14.5%, up from 13% in the first
half 2009, as tight cost control put in place amid the downturn
last year helped offset the drag on margins from recently acquired
digital agency Razorfish.
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54;
ruth.bender@dowjones.com
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