Last Updated Jul 23, 2009 1:14 PM EDT
That, pretty much, is the scenario Publicis boss Maurice Levy -- also French, luckily for this allegory -- painted in his Q2 2009 earnings release today. The recession, which started in 2007, was "unexpectedly steep," Levy's statement said, and only now was Publicis reckoning with the "increasingly extreme" market corrections.
Second half revenues were down 1 percent to â‚¬2.2 billion; net income was down 13.6 percent to â‚¬172 million. Revenues in Europe are falling far faster than those in the U.S.
Here's Publicis' commentary, which gives the impression that the agency network didn't really realize how bad things were until now:
The second quarter fully revealed the severity of an economic crisis that has continued to deepen throughout the period.Levy may have deluded himself into believing he was immune from the recession based on his Q1 numbers -- they were up -- and his refusal to admit that anyone was laid off from any of his shops.
In April, ZenithOptimedia revised its late-December forecast of a 0.2% decline in the advertising market for 2009 down to a decline of 6.9%.
The most recent forecast, from early July, shows further deterioration, with the market losing 8.6% during the year, although it suggests a more stable second half.
These increasingly extreme corrections have come in response to an unexpectedly steep curve.
The statement focused on the good news: Publicis' maximum exposure to the General Motors bankruptcy will probably come out at only â‚¬9 million. But dig deeper in the numbers and you find an increasingly inefficient agency whose staff earn less in client billings with every passing quarter.
The revenue yield for every euro Publicis spends on operating expenses declined to â‚¬1.18 (click on chart to enlarge), meaning that Publicis gets only 18 cents operating profit, down from a high of â‚¬1.23. (That's still much more efficient than WPP, Omnicom or Interpublic.)
For every euro spent on Publicis staff salaries, the company got back just â‚¬1.55, down from a high of â‚¬1.65 in FY 2008. That's an average of 6 percent less in revenues per staff member. What does that mean? Layoffs, probably.
Other news, WSJ:
Without the impact of General Motors' bankruptcy filing, Publicis' organic revenue would have been down 5.4% in the first half, instead of 6.6%, the group also said.And Publicis won't be buying IPG.
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