Print Published 12th Nov 2012, 10:23

Publicis makes reassuring noises about revenues

Following a rather gloomy trading projection portrayed two weeks ago, Publicis Groupe’s chief executive Maurice Lévy this morning gave an unexpectedly upbeat update on trading in October, claiming organic revenue growth in the month of more than 7% “after the brutal and unexpected decline of advertising spending in September” (see Weak euro boosts Publicis revenues)

 [private]

This “spectacular growth” has been most notable in the United States, digital businesses and developing markets, Lévy said.

It is not immediately clear why Lévy felt the need to make his bullish announcement.  Admittedly the company’s share price had fallen by nearly 10% since the pending offer to acquire the Dutch based digital network LBi International was announced in September (see Publicis offers to buy LBi for €416m), but Lévy had already stated that the group has adequate resources to fund the purchase in cash and so a decline in the Publicis share price is not immediately relevant.

And while Publicis is due to repay borrowings and to satisfy deferred acquisition payments within the next year that together totalled €518 million at 30 September, its net borrowings were very modest at that date (although some of its cash balances are probably held for the payment of media bills).

Last month Publicis put back the predicted completion date for the LBi deal as it submitted the deal terms for approval by the Netherlands Authority for Financial Markets (“AFM”).  But there is no obvious reason why that approval process could be influenced by Publicis revenue projections, whether upbeat or downbeat.  Subject to AFM approval, the formal offer for LBi is currently expected to be published later this month.

Meanwhile Publicis has continued to buy LBi shares in the market and has accumulated a 20.6% stake to date.  On top of that it has irrevocable undertakings for a further 63% of LBi’s share capital.

Despite the sudden burst of upbeat noises, Lévy is still urging investors to remain cautious: “Fourth quarter is always uncertain particularly December”, he said. “At this point in time we cannot yet confirm that growth and confidence are back. We will continue to aggressively pursue our strategy on our two growth pillars: digital and fast growing markets.”

[/private]