Through Publicis Groupe's Financial Looking Glass

Publicis Groupe released its third quarter earnings results this week and most of the coverage focused on the company's 1.5 percent decline in revenues, to $1.1 billion. Those reports, however, don't give the full flavor of the baffling way in which the French report their numbers.

A few noted that Publicis CEO Maurice Levy's gloomy outlook for 2009, and the fact that Levy gave little guidance for the coming year. But check out the difference between how the French agency holding companies report their results, compared to those here in the U.S. Levy began his conference call by saying:

As you are all well aware in France the Q3 disclosure is limited to revenues, so we will not enter into any detail regarding P&L.

This means that despite the company's revenue picture (currency fluctuations actually turned growth into a decline) we currently have no idea whether this company is making money or not. They could have a line on the income statement for cheese and wine expenses, for all we know. Nor do we know which of their giant agency brands -- Saatchi & Saatchi, Leo Burnett, Kaplan Thaler Group, etc. -- are banking or tanking.

The reports also played down just how negative Levy was about the economy. Here's what he actually said:

We have entered a turbulent zone and it is very difficult to predict the intensity or the duration of that turbulence. I have personally experienced many crises in the past, each one was very different and this one is no exception. The first and most important difference is the brutality and scope of the financial crisis. This is really incredible. [Governments are intervening] to a degree that has never been seen before, and for a result that so far looks a little bit modest.

And there was a bunch of other bad news that didn't make many headlines. There has been negative year-to-date revenue growth in Japan, Germany, Spain and Belgium. That's an actual decline, not currency. You didn't see that in the press release.

The company is also maneuvering its debt around. It has $1.9 billion in gross debt on its books, but only about $700 million of that comes due in the next year or two. By creating low debt obligations in the short term, Publicis is giving itself a cash cushion for the recessionary period. That seems fine, except the remainder -- $1.2 billion -- comes due in 2011 and 2012, giving the agency a steep hill to climb (or some fast-talking to do with its bankers) at that time.

Why is Publicis doing this? Because Levy believes that what investors want to see right now are, "good cash generation, good liquidity and a solid balance sheet." Such cash-hoarding comes at a price, and, of course, like its rivals IPG and Omnicom, Publicis has its own euphemism for the layoffs that will be required to generate that cash: "consolidation."