February 8, 2018 / 6:31 AM / 5 months ago

Digital shake-up drives Publicis to revise down profit target for 2018

* Group had expected 2018 margin rate in 17.3 pct-19.3 pct range

* Restructuring costs, transformation weigh on results

* Strategic plan to be presented on March 20 in London

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS, Feb 8 (Reuters) - French advertising group Publicis said it would revise lower an over-ambitious profit target for 2018 as it strives to adapt to the new digital world that has shaken up the ad industry.

The costly integration of the group’s digital arm Publicis.Sapient, which Publicis sees as a key driver for growth, as well as an internal push for increased collaboration between its many agencies, have weighed on results.

Despite strong economic momentum in Europe and North America, Publicis’ underlying sales grew by a mere 0.8 percent in 2017 to 9.69 billion euros ($11.9 billion), it said in a statement on Thursday, well below its annual performance just a few years ago.

“We’re not pretending that today’s results will satisfy the markets for the next ten years,” Chief Executive Officer Arthur Sadoun said in a briefing with reporters. “However, we think we’ve done some solid work here.”

Proof of it is the 2.2 percent growth of underlying sales in the fourth quarter alone, thanks to the win of big accounts like USAA, Wal-Mart and Hewlett-Packard in 2016, Sadoun said, on top of another contract with McDonald’s in partnership with IT consulting firm Capgemini.

But that might not be enough to alleviate larger concerns for Publicis and its peers WPP, Omnicom and Interpublic, which have all unperformed the leading stock indexes on both sides of the Atlantic.

The big four face the growing threat from business consultancies Accenture and Capgemini while data-driven tech giants like Facebook and Alphabet’s Google have taken up a big slice of the media space online.

Global clients review the effectiveness of their marketing budgets as a result, prompting fierce competition between the traditional advertising players.

In that context, Publicis said its targets set in 2013 had to be “revised”, including an operating margin goal in the range of 17.3 percent to 19.3 percent in 2018.

The group now targets an operating margin rate for this year of more than 15.5 percent this year, as well as an underlying sales growth higher than the 0.8 percent posted in full-year 2017.

This contrasts with several general forecasts on global ad expenditure, which Publicis’ agency Zenith sees growing by 4.1 percent this year to $578 billion.

Publicis said it will go into greater details about its strategy and financial targets during an investor day held in London on March 20. ($1 = 0.8158 euro) (Editing by G Crosse)

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