Publicis seeks to boost growth by going deeper into consulting

By Mathieu Rosemain and Gwenaëlle Barzic

PARIS (Reuters) - France's Publicis is doubling down on its efforts to become a consulting partner for global advertisers online in the hope to reverse sluggish growth and beef up margins over the next three years.

The world's third-biggest advertising group said on Tuesday it is targeting underlying sales growth of 4 percent in 2020, up from 0.8 percent last year, by tapping its digital arm Publicis.Sapient and fostering greater collaboration between its myriad of agencies.

The target is part of a three-year strategic plan to be unveiled by chief executive Arthur Sadoun in London on Tuesday in a key test since he succeeded company veteran Maurice Levy, amid lower spending from big clients and the emergence of Alphabet Inc's Google and Facebook as ad giants online.

The plan, dubbed "Sprint to the Future", confirms the group's shift toward using technology to offer both creative content and tools for firms looking to tap a greater number of consumers.

Publicis now regularly pitches against consultancy firm Accenture for new accounts, Sadoun has said previously.

Shares of Publicis and bigger rivals WPP and Omnicom have underperformed benchmark stock indexes over the last year, as investors penalized disappointing results and weak forecasts, with WPP - the worst performer among the three - expecting flat growth this year in 2018.

Having dropped an earlier operating margin rate forecast of at least 17.3 percent this year, Publicis said it still saw room for improvement and is now targeting a margin of maximum 17 percent in 2020, up from 15.5 percent last year.

"The challenge is to justify how we can progress like this while maintaining the growth," said Sadoun in a late Monday call with reporters.

"The market is not expecting these numbers."

COST CUTS

On top of growing sales, the expected increase in margins will come from a 450 million-euro ($555 million) cost saving plan over the next three years, Publicis said, about two thirds of which will be redeployed to hire and train employees.

The group is hoping to boost profits from targeted acquisitions totalling between 300 and 500 million euros per year between 2018 and 2020, including companies in the fields of data and "business transformation."

For Publicis, the challenge remains to prove that Sapient, which weighed heavily in a 1.4 billion-euro writedown in 2016, is well integrated into the company and will improve results, analysts have said.

The recent signing of multi-year contract with Daimler's Mercedes-Benz brand to become its global digital agency and the winning of a media account with hotels group Marriott are proof that Publicis is on the right track, Sadoun said.

"There will be bumps in the road… It's not going to be easy," he said.

"It is a very challenging market."

($1 = 0.8103 euros)

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Shri Navaratnam)