The second quarter results of PublicisGroupe had surprised the market with a reported 2.1% fall in organic revenues that saw its Europe, North America and Asia Pacific regions all reporting falls. Publicis Groupe cited implementation efforts to comply with new privacy regulations known as GDPR as contributing to its tepid performance in the period.
The stock was down more than 8.5% in mid-afternoon trading to €53.30. Publicis was the second holding company this week to face the wrath of the markets after turning in disappointing Q2 results. On Tuesday Omnicom’s stock price fell more than 9% after its earnings report fell below Wall Street’s expectations.
The Asia Pacific region overall saw its net revenue decline by 15.2 % and its organic growth drop 3.3% over the period. Singapore and China offset the poor Australian results with a 6.3% and 0.4% gains respectively.
CEO Arthur Sadoun blamed the disappointing global results on GDPR implementation costs in Europe and the US healthcare business, telling the market: “We saw a slowdown from our good first quarter of +1.6% to a second quarter at -2.1%, mostly due to two conjunctural challenges – tougher basis of comparison and uncertainty relating to GDPR implementation impacting our net revenue in Europe – but also to one specific operational bump with our volatile health sales representatives business in the US.
“This bump represents the biggest share of our negative growth as the overall impact of our Publicis Health business was around 30 million euro.
“Despite the environment, we showed a 60 basis point margin improvement and 40 basis points on a comparable basis at constant restructuring charges. This 40 basis point expansion actually includes +70 basis points thanks to cost savings and investment in our game changers representing 30 basis points.
“These reflect two important points: first, we are making progress in delivering on our efficiency plan, demonstrating our ability to reduce costs while providing more high value products and services to our clients. Second, we are investing in our key strategic capabilities to build the growth of the future.”
In the longer term, Sadoun said PublicisGroupe intends to deliver greater value to shareholders by through accelerated organic growth, improved margins and bolt-on acquisitions.
The company also committed to increase its operating margin by 30 to 50 basis points per annum between by 2020, underpinned by a 450-million euro cost savings plan.
