July 20, 2017 / 5:30 AM / a year ago

Publicis reports underlying sales growth in Q2, beating expectations

PARIS, July 20 (Reuters) - France’s Publicis said on Thursday it regained a little traction in the second quarter, driven by a surge in revenue in its biggest regional market, North America.

The world’s third-largest advertising group said its underlying sales grew by 0.8 percent to 2.52 billion euros ($2.90 billion) in the second-quarter from a drop of 1.2 percent a quarter earlier.

This beat a Reuters poll forecast of a drop of 0.3 percent.

Underlying sales advanced by 0.2 percent in North America over the period, helped by the gains from recently-won accounts. They dropped by 2.4 percent over the first-half in the region, sill hit by several contracts that have not been renewed.

The Paris-based group has gone through an internal reorganisation over the last 18 months, dubbed “The Power of One”, aimed at fostering greater cooperation between its myriad agencies and is strongly backed by the newly-appointed chief executive Arthur Sadoun.

“We need to accelerate in execution and go deeper in integration,” he said. “Improving organic growth is our number one imperative.”

Sadoun, 46, replaced company veteran Maurice Levy last month and shocked the industry by announcing Publicis would skip all major ad award events for a year to focus on the creation of a sophisticated internal network, built by Sapient, the ad firm it acquired for $3.7 billion.

He said he approved the strategy initiated by his predecessor to position the group closer to digital consulting, making it compete with companies like Accenture.

This contrasts with bigger British rival WPP, which invested heavily in software that automatically buys and sells advertising space on the internet, and smaller French rival Havas, which merged with media giant Vivendi.

Publicis has still to prove that going into the digital transformation business is the right choice, after it took a big writedown on its digital arm Publicis.Sapient that is hampering its capacity to increase dividends.

Like the rest of the industry, the 91-year-old company faces the growing threat of Internet giants Google and Facebook, which have transformed the sector by using data to better target advertising.

Sadoun said that Publicis’ first priority was to increase underlying revenues. He is reviewing the group’s 2018 targets, which include a including a yearly operating margin of 17.3 to 19.3 percent.

In the first half, Publicis’ operating margin stood at 13.2 percent.

“I’ve been doing in this job for seven weeks now,” he said. “I am focusing on two things: organic growth and making our model even more efficient.”

$1 = 0.8684 euros Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Toby Chopra

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