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Publicis cuts revenue guidance after disappointing second quarter

By Mathieu Rosemain and Gwénaëlle Barzic
Logo of Publicis is seen at VivaTech fair in Paris

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS (Reuters) - Publicis, the world's third-biggest advertising group, cut its 2019 revenue growth guidance on Thursday after reporting a weaker-than-expected performance in the second quarter as it struggles to revive sluggish sales in the United States.

Publicis, whose revenue is being squeezed by competition from Facebook and Google as well as tightening ad budgets by major clients, now expects a "broadly stable net revenue" in 2019, excluding the impact of acquisitions and foreign exchange.

Publicis had previously forecast higher organic revenue growth in 2019 than in 2018, but gave no precise figure.

In 2018, its organic revenue growth amounted to 0.8%, excluding the underperformance of a U.S. business that it sold in January.

The group posted second-quarter 2019 organic growth of 0.1 percent, missing a market consensus estimate of 0.7 percent, as the gains of key media budgets for GlaxoSmithKline and Fiat-Chrysler failed to offset weaker sales in the United States, its number one market.

That compares with the 2.8% organic growth posted by bigger U.S. rival Omnicom over the same period.

"We still face the same issue, as anticipated, as our contracts on traditional ads in the United States continue to suffer," Chief Executive Officer Arthur Sadoun told reporters ahead of the results.


MARKET UPDATE

Sadoun, who succeeded company veteran and current chairman Maurice Levy in 2017, has promised to offset the decline in ad spending by steering the business closer to consulting groups and offering clients technological tools on top of traditional creative marketing campaigns.

That is why Publicis snapped up data-focused marketing business Epsilon earlier this month for $4.4 billion -- its biggest acquisition ever.

Through Epsilon, Publicis hopes to beef up its data and tech expertise following the difficult absorption of digital ad business Sapient, bought in 2015.

Publicis' quarterly underperformance led the group to put its ambitious 2020 organic revenue growth target under review. Publicis expected an underlying sales growth target of 4 percent - an objective that many analysts considered nearly impossible to attain.

Sadoun cited the takeover of Epsilon as the main reason for putting the longer term growth guidance under review.

"We will update you, certainly in the coming months," the CEO said in a call with analysts.

Despite the lower revenue growth forecast, Publicis confirmed its 2019 operating margin and EPS targets. The group expects its operating margin rate to improve in 2020, on top of a 5-10% increase in its headline EPS.


(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by GV De Clercq and Elaine Hardcastle)