PARIS (Reuters) - France’s Publicis booked record earnings per share in 2018 despite lower revenue, by squeezing costs and simplifying its organization as it tries to convince clients it has the right business model in a world that is going digital.
The world’s third-biggest advertising company said fourth-quarter net revenue fell 0.3 percent to about 2.49 billion euros ($2.83 billion), excluding the impact of acquisitions and foreign exchange, far below market expectations of growth of 2.5 percent.
Yet the Paris-based company managed to beef up its full-year operating margin rate by 0.60 percentage points to 16.7 percent, above its own targets, thus strengthening its position as the most profitable ad group compared to rivals WPP and Omnicom.
Rigorous cost management and greater collaboration between a myriad of creative agencies worldwide helped increase profits. Publicis is striving to move away from traditional advertising and closer to digital transformation and consulting via its arm Publicis.Sapient.
“We’ve made structural efforts to simplify things, get people to work together, cut the number of profit and losses statements so that we all work more like a platform and not like a holding company,” Chief Executive Officer Arthur Sadoun told reporters ahead of the results.
Facing both a decline in spending from large consumer goods clients like Procter & Gamble and the dominance of tech groups like Alphabet’s Google and Facebook online, Publicis seeks to offer technological tools to customers on top of creative campaigns and advertising space purchasing.
That strategy and the internal expertise of thousands developers in India within its digital division, was critical in winning the global media budget of GlaxoSmithKline and Fiat-Chrysler’s North America budget in the last quarter, Sadoun said.
It also moves Publicis closer to newcomers in the advertising field such as consulting giant Accenture, which the Publicis boss often cites as an example.
“If I can draw a comparison with the music industry which took a big hit not so long ago, it’s all about the speed with which we can move from the sale of traditional CDs to streaming,” he said.
Headline diluted earnings per share jumped by 10.3 percent to 4.72 euros, thanks notably to total cost savings of 194 million euros last year. The group said it would propose a 2.12 euro dividend per share, representing a 45 percent payout.
Publicis confirmed its 2020 underlying sales growth target of 4 percent, far above what it generated last year with tiny growth of 0.1 percent.
The group said it expected a “bumpy ride” in the first quarter as it expects spending from traditional consumer goods clients to continue to fall.
Growth should pick up from the second quarter, it said, forecasting a higher organic growth this year than in 2018 and further increases of its operating margin in 2019 and 2020. It also expects to buy back 400 million euros worth of shares.
($1 = 0.8787 euros)
Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Leigh Thomas and Elaine Hardcastle