Above: Publicis Groupe CEO Arthur Sadoun
Publicis Groupe executives said the performance of its healthcare units was largely to blame for Q2 earnings results that disappointed investors on Thursday.
The third-largest marketing services holding company in the world reported that organic revenue was down 2.1% in the period to $2.56 billion, well below the 1.1% organic growth expected by analysts. Shares of Publicis fell as much as 9% on Thursday.
Publicis Health Solutions was responsible for a drop of nearly $35 million in revenue, CEO Arthur Sadoun said on an earnings call. Organic revenue fell by 2.3% in North America in the period.
Publicis is in a unique position in the healthcare communications sector with Publicis Health Solutions in that it supplies contract sales organizations. The business is intrinsically volatile, and developments in healthcare have led clients to make last-minute changes that have resulted in the postponement or cancellation of campaigns. The Paris-based holding company has launched a review of the business, which Sadoun called “noncore.”
“I reiterate, if necessary, that our market has been facing major challenges and transformation has become a necessity for all,” Sadoun said on an earnings call. “Initiatives we launched very early and acquisitions we made are bearing fruits: we are able to overcome unavoidable budget cuts and changes in marketing plans thanks to our assets and our organization that position us in the most competitive way possible.”
Revenue also suffered in Europe thanks to uncertainty around the adoption of GDPR, which resulted in the temporary suspension of campaigns with publishers who couldn’t prove compliance. Those losses totaled nearly $12 million, Sadoun said.
“It will not be an easy journey as we must transform ourselves while facing some strong market headwinds. There could be some unexpected bumps in the road like the one we just experienced in the health sector,” he said. “But we have an outstanding team, unmatched capabilities in data, creativity, and technology and a proven winning model that make us very confident for the future.”
Publicis’ disappointing earnings report came two days after fellow holding company Omnicom Group also revealed Q2 numbers that missed expectations.