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Advertising industry faces marked decline
Published in The Saudi Gazette on 29 - 10 - 2008

French advertising group Publicis predicted a marked slowdown in the ad industry next year while British firm Aegis said it could no longer forecast whether companies would spend.
“We believe our industry will face a difficult end of 2008 and a marked slowdown in 2009,” Publicis Chairman and Chief Executive Maurice Levy said as the company reported third-quarter results on Tuesday, adding to evidence that the global financial crisis has hit marketing budgets.
Last week Omnicom Group, the world's largest advertising company, said retail and automotive clients were beginning to push back and even cancel some advertising plans.
Earlier this month, ZenithOptimedia, a leading international media buyer slashed its global advertising spend forecasts for 2008 and 2009.
At 1208 GMT, shares in the Publicis were up 2.7 percent, having recovered from an earlier fall, at 16.2 euros while shares in smaller peer Aegis fell 4.3 percent to 60.75 pence in a higher market. WPP, the world's second-largest ad group, was up 3.6 percent having initially fallen on the news. It is due to report on Thursday.
Publicis, whose clients include food group Nestle, energy giant Total and airline Emirates, pledged to tap the digital sector and emerging countries to grow market share and protect its margins.
Aegis said it would manage its cost base tightly and said it still expected to benefit from the strength of the euro and the US dollar in relation to sterling.
Publicis posted a 1.5 percent fall in third-quarter revenue to 1.11 billion euros ($1.38 billion), hurt by a 71 million euro hit from the weakness of the dollar and the pound against the euro, broadly in line with analysts' revenue forecasts of 1.113 billion.
Its sales rose 5.1 percent at constant exchange rates, with organic growth of 3.9 percent. The company said the third quarter had ended with higher organic growth than expected given the global financial crisis.
Aegis nine-month organic revenue growth of 7.3 percent after its media division grew well in most of continental Europe.
Publicis said it expected to see weakness in mature markets and traditional sectors, while Aegis said it had already seen slowing media demand in Britain, the US and Spain.
“Clearly slowing growth is not intrinsically positive, but it is no surprise and we believe that these (Publicis) results and comments should prove reassuring relative to some concerns in the market,” UBS analyst Alastair Reid wrote in a note.
Reid described the Aegis organic growth as robust but forecast full-year growth of 4.9 percent, implying a significant sharp slowdown in the fourth quarter.
“Aegis currently trades on around 7.5 times 2009 earnings, broadly inline with Publicis,” he said. “Whilst this appears inexpensive ... we believe that with consensus earnings downgrades coming through and the lack of visibility for the company, the stock is likely to come under further pressure near-term.”
Publicis added that its liquidity was “satisfactory” at 2.2 billion euros at the end of September and said net debt had fallen 255 million euros from a year earlier to 1.245 billion. The company did not plan to make any major acquisitions, despite any opportunities arising from the financial crisis, and would seek to preserve cash and be “very selective” in its investments, Levy said.
Aegis said its financial position was strong, with committed headroom of 112.1 million pounds in its revolving credit facility and it has no material refinancings prior to 2011.


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