Market news and a positive update from Publicis.

Market News

US equity markets moved higher last night following the release of the Fed minutes: S&P 500 (+0.4%); Nasdaq (+0.7%). The positive tone continued in Asia this morning after China’s sovereign wealth fund bought shares in the nation’s largest banks: Nikkei 225 (+1.8%); Hang Seng (+2.2%); Shanghai Composite (+0.9%). The FTSE 100 is currently trading 0.5% higher at 7,657. Companies trading ex-dividend this morning include Tesco (1.37%), WPP (2.01%), Spirax Sarco (0.51%), Kingfisher (1.79%).

UD Federal Reserve officials agreed policy should remain restrictive for some time, according to the minutes of their September meeting. They also noted that risks have become “more two-sided,” with the danger of overtightening and a recession balanced against prolonging inflation above 2%. The 10-year Treasury yield continued to drift lower, to 4.55%. Gold moved up to $1,882 an ounce.

Chinese consumers remain downbeat about the economy, despite early signs of improvement in recent data, a BofA survey showed. The proportions of respondents expecting pay hikes and planning to boost spending both fell from two months ago.

The UK economy registered a modest rebound in August as the dominant services sector offset another weak month for manufacturers and construction firms. GDP rose 0.2%, in line with expectations, but manufacturing shrank 0.8% and construction contracted 0.5%. The UK housing market showed signs of stabilising in September as gauges of new buyer inquiries and sales bounced off recent lows, a RICS survey found. Sterling trades at $1.2309 and €1.1581.

Oil dropped for a third day, to $85.50 a barrel, erasing most of the surge that followed Hamas’ attacks on Israel over the weekend. There’s still “a latent risk of a geopolitical flare-up in oil,” said Mizuho Bank’s Vishnu Varathan. Monthly oil market reports from OPEC and the IEA will be closely watched for fresh cues.

Source: Bloomberg

Company News

Publicis Groupe has this morning released a positive third quarter trading update and once again lifted its guidance for the full year. In response, the shares have been marked up by 4%.

Publicis is a leading global communications group, with businesses including Saatchi & Saatchi, Leo Burnett, and Zenith Optimedia. The group generates one third of its revenue from each of data & technology (i.e., Sapient and Epsilon), creative, and media. The business serves a broad range of industries, including automotive (15% of net revenue), financial (14%), healthcare (13%), food & beverage (13%), and TMT (12%).

During the three months to 30 September, net revenue grew by 0.1% to €3,241m. Organic revenue – the group’s key operating metric (which strips out the impact of acquisitions and currency) – grew by 5.9%.  This was despite a macroeconomic context that became more difficult over the quarter. Organic revenue is 22% above pre-pandemic levels (i.e., Q3 2019), an acceleration compared to the first half.

Media, one third of revenue, continued to experience strong new business momentum and grew high-single-digit on top of double-digit last year. Data and tech activities, another third or revenue, posted very solid growth overall. Publicis Sapient grew by 1.2% despite a very strong comparable base versus the same quarter last year.

Epsilon’s strong performance further accelerated to double-digits with 10.5% organic growth in Q3 after double-digits also last year, benefitting from increased client demand for first-party data management. Creative, the remaining third, posted a resilient performance with organic growth in the low-single digits for the quarter.

All regions posted solid organic growth, with the US up 3.2% on top of double-digit growth in the last two years, Europe at a standout +10.7%, and Asia Pacific improving again at +3.8%.

The financial position of the company remains solid, with average net debt over the last 12 months of €451m, down from €870m for the previous 12 months (1.1x EBITDA).

Looking forward, despite persistent macroeconomic uncertainties, the group has once again raised its full-year guidance. Organic revenue growth is now expected to be 5.5%-6.0%, versus ‘around 5%’ previously. This is probably fairly conservative given growth of 6.5% at the 9-month stage. The operating margin is now expected to be 18%, versus previous guidance of to be ‘close to 18%’. Free Cash flow is expected to be close to €1.7bn, versus previous guidance of ‘at least €1.6bn’.

For the rest of the year, the group intends to lead what it believes to be the two major priorities for the industry today: bringing teams back together in person and accelerating the ‘AI-ification’ of its operations using Publicis Sapient.

Source: Bloomberg