Shares in Publicis fell sharply after the French advertising group warned that the loss of a number of key North American media buying accounts had weighed heavily on revenue in the third quarter.
The Paris-based company, which owns agencies including ZenithOptimedia, Saatchi & Saatchi and Razorfish, issued a cautious outlook for next year, warning of potential political instability due to a spate of elections and the economic fallout from the United Kingdom’s vote to leave the European Union.
"We approach 2017 cautiously given the lack of visibility owing to elections in the US, France and Germany, and the consequences of Brexit," said Maurice Lévy, the company's chief executive.
Shares fell as much as 6.5 per cent on Thursday after it reported a 0.4 per cent drop in sales to €2.32 billion in the three-month period. The group said it was hit by a "sharp downturn" in North America after it lost advertising purchasing business with key clients such as Procter & Gamble and Coca-Cola in the United States last year. Sales in the US were down 4 per cent.
Ian Whittaker, analyst at Liberum, pointed to concerns about the group's long-term digital strategy and if "its negotiation power has softened on the back of the account losses in 2015".
Organisational structure
In December last year, Publicis launched a campaign to turn its organisational structure “upside down” by focusing on four main units: communications, media, digital and consulting, and healthcare.
The company on Thursday said this was bearing fruit, citing recent wins of business from Walmart, GlaxoSmithKline, Hewlett-Packard, Coty and USAA.
Thomas Singlehurst, analyst at Citi, said the Publicis results were a "little light" but "we don't think the underlying investment case is fundamentally altered". He said Publicis had flagged it would be a tough quarter.
Mr Lévy confirmed that he plans to step down next year after almost 30 years as chief executive of the group. The process of finding a successor will start in November and is expected to be completed by February, he said.
He added that he could take another position in the company to assure a smooth transition if the board asked him to do so.
Publicis warned that the fourth quarter was often weak for advertising spending, but said it would nonetheless raise its dividend payout ratio to 42 per cent in 2016 from 39.5 per cent last year, achieving a target it originally set for 2018.
– (Copyright The Financial Times Limited 2016)
