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99 Francs: Advertisers in free fall.

19 July 2018 by jbchevrel

Publicis' (PUBFP) sales unexpectedly fell in Q2 (-2.1% vs +1.1% consensus). That resulted in a wider CDS spread (+7bp on the 5y) and a slumping share price (-9%). Earlier this week, a similar story happened to Omnicom (OMC) across the Atlantic, which raises concerns about the advertising sector as a whole. Three factors seem to explain those underwhelming results: 1/ new European data-protection regulations ('GDPR') 2/ growing competition from tech (Google) and consulting firms (Accenture) 3/ a volatile healthcare business in the US. Those 3 factors are common features to the whole sector and it is not surprising to see WPPLN widening in sympathy with PUBFP today. That being said, the advertising industry is currently reinventing itself with the digital. Today the digital represents less than a tenth of PUBFP revenue, but the pace at which this segment is growing is strong (up c25% this quarter). Elsewhere, it was a widening session in Europe (Main+2 XO +5 Sen +5 Sub +11), UK financials leading the way as people reassessed the UK political risk.