The United States, the Achilles heel of Publicis in 2016 – The Echoes

” Is what it ought to acquire Sapient ? Yes, it was needed. This buy-us-t-it allowed them to be more competitive ? Yes. The price paid was it the right one ? We’ll know probably in the next three to four years. “ on Thursday morning, during the presentation of the financial results of Publicis group, the chairman of its management board Maurice Lévy defended foot to foot the relevance and especially the price of the redemption of the independent agency of marketing and digital communication. Because it had to heavily depreciate the carrying value of its american subsidiary, Publicis.Sapient, in which it is housed. With the key of this impairment, a net loss of 527 million euros in 2016 for the gr oup.

Nugget digital

Coveted at the time by the WPP, CapGemini and Accenture, the “nugget digital” had been acquired in November 2014 for $ 3.7 billion, enabling the group to accelerate the transformation of its business profile to even more digital. The merger gave birth to the platform Publicis.Sapient grouping including SapientNitro, Razorfish Global, Rosetta and Digitas LBi.

But the year 2016 proved complicated for Publicis.Sapient. The poor overall performance of the group in North America that have leaded to the exercise. Publicis has lost major contracts media in 2015 and 2016, while Razorfish saw its sales declining (-15 %), the victim of problems in its internal management. In organic, the activity of digitalis has declined by 0.4% in North America year-on-year.

Pure book-keeping operation

And if the turnover of the region grew 1 % year-on-year, the organic growth is negative, down 2.2%, and even by 6.9 % over the last four months. However, the North American region generates 54 % of revenues. What are these counter-performance which has led the group to perform a major depreciation in the digital in the United States ” for an amount of 1.44 billion euros, of which 1.39 billion as of Publicis.Sapient “, say the analysts at Aurel BGC. An operation that has pushed the accounts into the red, where the group had a net profit of 901 million euros in 2015. the ” It is a pure accounting transaction that has no consequence in cash “, commented Maurice Lévy, recognizing, however, that the business plan of Sapient had been too ambitious.

virtuous

The total and the whole of the year 2016, the turnover increased by 1.4% to 9,733 billion euro and organic growth was only 0.7 %. But the accounts are wiped : ” We did not want to operate of scholars toilettages “, commented the boss of Publicis. A way to make clear to Arthur Sadoun, who will succeed him as chairman of Publicis groupe on June 1st. In the first half of 2017, the income is expected to be further impacted by the loss of budgets and the difficulties of Razorfish, but the second half should be better. The recent gains, the United States, media accounts of the brewer Miller Coors (920 billion) and Mattel ($ 150 million) might suggest the restoration of a virtuous circle.

Restore margins

Remains to be Arthur Sadoun, the delicate task of restoring margins, which have a real potential of evolution in a number of activities. And especially to tackle the problem of organic growth, which was negative to the tune of 2.5 % over the last four months 2016. The market is still confident. After wrapping up nearly 5% on Thursday morning, the title of Publicis closed at -1,49 % to 62.14 mph euro.

V. A.