PubliGroupe: First Half Affected by Recession and Weaker Media Sales

Consolidated sales are down 28% at CHF 798.4 million, while the gross margin is 22.6% lower at CHF 164.8 million, a reduction of CHF 48.1 million.

Media Sales-Publicitas and the group’s participations in the press are the worst affected by the crisis. Media Sales-Publicitas, with sales down by 28.8% and an operating loss of CHF 15.6 million, is the prime cause of the group’s lower results.

Search & Find is standing up well to the recession thanks to the development of its online business activities, as too is Digital & Marketing Services because of its stake in zanox which operates in the performance-based online marketing sector.

PubliGroupe reported an operating loss of CHF -3.5 million and a net loss of CHF -8.5 million at the end of the first half of 2009.

Cost-cutting programmes at Media Sales–Publicitas enable the impact of the recession to be cushioned and are already contributing savings worth CHF 23 million (-16.3%) by comparison with the first six months of 2008; however, these are still not enough to make good the decline of the gross margin.

 

Transformation of Media Sales-Publicitas

Commercial communication is living through a phase of far-reaching change whose effects are being amplified by the economic situation: advertising opportunities are increasing sharply with the boom of online communication, an inevitable phenomenon of concentration is transforming the media world while national advertisers are exerting considerable pressure on media prices. Competition between media groups to secure national advertising budgets is therefore increasingly keen and price offers tend to be negotiated directly with clients. These trends have called into question the business model of Media Sales-Publicitas based on representation contracts, remunerated by commissions calculated on the basis of the fixed rate card decided by the publisher.

A new business model, based on a flexible service offering and a system of remuneration for each service rendered, has therefore been developed. It responds to the need felt by certain media to negotiate their offers directly with the big advertisers, while benefiting from the services of Publicitas, each of which is remunerated on the basis of its added value. Last spring Media Sales-Publicitas announced the broad outline of the new service offering which it proposes to introduce gradually on the Swiss market in coming years:

Publicitas will develop a modern promotion and sales organization for the media (network of over 50 points of sale, online platforms). The promotion and sales services will be offered on a modular basis and invoiced transparently in the light of the services requested, with a performance-based component. In future, therefore, Publicitas will offer variable service packages; the media will also retain the possibility of outsourcing all of their promotion and sales to Publicitas.

Publicitas is developing a digital platform for the management of all kinds of advertising orders which will be open to all the entities involved in this branch. Thanks to standardisation and the use of modern technologies, it will provide benefits in terms of efficiency and costs for all its users. The first pilot projects for this platform will be implemented before the end of the year.

Publicitas-Publimedia plans to reorganise media promotion at national level in the light of the realities of this market and in agreement with the media concerned. In addition, PubliGroupe will develop a new concept of “media services” for major national clients and their agencies in 2010, in a separate entity.

This ambitious project will be introduced onto the market from the end of this year; the complete transformation of Publicitas Switzerland will require around two to three years. All existing contracts will be respected. The final outcome will be an organisation which is smaller than today, but more competitive, and profitable with higher added value.

 

Outlook

The operational and strategic measures taken some time ago in anticipation of the structural changes which are gathering pace today will enable the adverse impact of the crisis to be mitigated.

The Media Sales business model is being restructured in-depth as explained above. Its costs are constantly being cut, as are those of PubliGroupe’s central structures. Other measures, including for instance an early retirement programme, will enable further cost reductions to be achieved in 2010 and beyond.

 

Search & Find intends to safeguard the profitability of its printed products and develop its online services.

In the space of just two years, Digital & Marketing Services has become a business area which is making a major contribution to the results of the group and to its development in the promising field of performance-based online marketing; this is its main focus of development today and the area in which core investments are being made. Its zanox participation (PubliGroupe 47.5% / Axel Springer 52.5%) is currently growing at the rate of 14.4%. The acquisition of an English company, Digital Window, which operates in the same business area as zanox, was implemented jointly with Axel Springer in August 2009 (PubliGroupe 47.5%). Provided that the approval of the anti-trust authorities is forthcoming, this will strengthen the position of the two partners on Europe’s largest online marketing and e-business market.

 

Taken together, these measures therefore hold out promising long-term prospects for the group.

On the other hand, the outlook for the second half of 2009 remains challenging for the advertising markets and the group results for 2009 will reflect this situation which is likely to mirror that of the first half.

Related Articles:

Folha De Sao Paulo Signs an Exclusive Advertising Agreement With Publicitas Charney/Palacios

Publicitas creates Hispanic print-ad sales firm


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Editorial Staff

Portada Staff

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