Posted on Oct 15, 2020 at 7:30 a.m.
This Thursday morning before market close, the world’s third largest communications group (Publicis Conseil, Leo Burnett, Sapient, Epsilon, etc.) kicked off the financial results of the communications sector, revealing better than expected figures for a third quarter, again, atypical. As the market began to lift its head and dream of a “year zero”, the Covid-19 epidemic has picked up again, leaving new uncertainties in the fourth quarter of 2020.
Publicis Group posted a sharp decline in net income of 9.1%, to 2.3 billion euros between July and September. But the organic performance of turnover shows a decline of 5.6%, where analysts had expected a drop of 8.9% over the period. Above all, the world’s third-largest communications group reveals net income up 2.7% to 7.1 billion euros for the first nine months of 2020.
The American market is resisting
Long considered to be “the Achilles heel” of Publicis, the North American market, at the origin of 60% of the net income of the whole and already rebounding in the first and second quarters, gave the group a whiff oxygen. “Our organic growth in the United States suffered a decline limited to 2.4% in the third quarter, again above the forecast for a decrease in investments of 7% in the market”, underlines the Chairman of the Publicis Management Board, who sees it as a sign of virtual stability.
The outcome of the November 3 presidential election and who, Donald Trump or Joe Biden, will dominate US fiscal policy for the next four years remains the unknown. Arthur Sadoun kicks in touch: “The only impact the American election will have on Publicis is the one it will have on the country in general and it is very difficult to predict at the moment. But the major competitions have resumed and we have just won those of Kraft Heinz in media and Reckitt Benckiser in creation and media. “
Fourth quarter under pressure
A cloudless landscape? Not quite. Publicis is proving the resilience of its model in its key region: the United States. Admittedly, the group recorded only a 9% decrease in its organic growth in Europe, while the consensus was counting on a drop of 13.6%. Likewise, in Latin America, the world’s third largest group suffered a drop of 14.8%, where analysts feared a plunge of 16.4%. In this region devastated by the coronavirus, the drop in net income was even 33.3% in the third quarter.
But in Asia-Pacific, a key economic zone, the drop in organic growth is stronger than expected, reaching 9.2% where the markets were watching only 5%. Even though China has reached near stability, according to the group.
Hence, once again, the extreme circumspection of the Chairman of the Management Board of Publicis: “We believe that the relatively solid trends in our activity should continue through the end of the year and allow us to post an operating margin rate in 2020 which is slightly higher than expected. With the current resurgence of the pandemic and the implementation of new restrictions, however, we must remain cautious about our performance in the fourth quarter, which could be more impacted and therefore lower than that of the third quarter. “