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Simply Weak Or Wounded?

12 February 2019 by lberuti

When PUBFP ( Publicis Groupe ) published a weak set of results last week and announced that Q4 organic revenues declined by -0.3% rather than the +2.5% increase analysts were expecting, they sent a shockwave through the investors’ community. Evidence is mounting that core advertisers are spending less which is increasingly becoming a structural rather cyclical issue for the industry. The risk premium of the whole sector increased on the back of it in the second part of last week, and people were bracing themselves for OMC’s ( Omnicom Group Inc. ) results. To the relief of investors, they came in line with estimates. In contrast to PUBFP, OMC reported a fourth quarter organic growth of 3.2%. And today, while PUBFP’s 5-year risk premium kept drifting wider (+1bp @ 72bps), OMC’s tightened back (-3bps @ 61bps). But the chief executive of OMC issued a note of caution. “When you are running a company, you don’t mind it when your competitors are weak” he said. “You really don’t like it when your competitors are wounded, because they tend to do things that they would not do if they were simply weak. It’s been a rather competitive environment the last six months or so…”