EuroBusiness Media (EBM): Publicis Groupe, the world’s third largest advertising and communications group, reports results for 2014. Maurice Lévy welcome. You are the CEO of Publicis Groupe, what are your comments on your results for 2014?
Maurice Lévy: 2014 has been a year with some difficulties. The first nine months have been quite tough and showing a growth which was not at the level of what Publicis is used to deliver. So we were quite disappointed. The end of the year has been much better than the first nine months, with for Q4 a growth of 3.2%. It is not yet where we should be, but it is clearly a huge difference compared to what we have delivered. By having such a growth for Q4, we have been able to deliver a full year at 2%, which is higher than what the market was expecting and our own expectations.
The margin has been also quite good. With such a low level of growth, we should have expected an erosion of our margin. In fact, if we are taking into account the difference of currency exchange rates and also the cost of acquisition, we should have posted a margin of 16.6%, which is a record. The reality is that we are posting a margin of 16.4%, which is very close to that of last year, showing that our business model is extremely robust and delivering a very good margin, probably the best of the industry.
On our balance sheet, we have a situation which is extremely good, with the net cash at the end of the year very close to €1 billion and indicators which are extremely good. Now, the good news for our shareholders is that our headline net profit is at €829 million, which is up 4.7% compared to last year, which allows us to deliver a dividend of €1.20, which is up by 9.1% compared to last year and representing 37.3% of distribution, which is well ahead of the numbers that we anticipated to deliver and the commitment we made, which was at 35%.
So, we are well on track to deliver the 42% for year 2018, which has been our commitment, and I think that the situation is extremely robust and gives us some hope to see Publicis back on a normal track for delivering very good growth for the years to come.
EBM: Do you have any particular comments with regards to trends in geographical zones?
Maurice Lévy: Yes, Europe is negative still, mainly due to the situation in Southern Europe – Greece, Italy, Spain and Portugal – which is not really a surprise to anyone, and also, unfortunately, regarding the UK. The UK mainly because of Razorfish and a little bit because of Publicis Worldwide. The US should have been in a great situation without the impact of Razorfish, and we feel very good about the US and North America with very good growth.
And, when you look at the rest of the world, we had for Q4 a double digit growth in BRIC and MISSAT as well as in the rest of the world. So, all in all, we feel good. We have a good geographic breakdown with some very good momentum in some countries. We have suffered from the situation with Razorfish in some markets, such as the US and the UK, but this is something which now belongs to the past.
EBM: And what about sector trends, do you have any comments on that?
Maurice Lévy: Yes, definitely. The sector which has worked pretty well is obviously Digital. Digital represents a close to 42% of the Group, with a growth of 7.3% compared to the growth of the Group which is at 2%. And without the impact of Razorfish, it would have been a double digit growth. So we feel extremely good about the choice that we made a few years ago to invest massively in Digital.
The other aspect which is working quite well and for which we have a good level of satisfaction is the Emerging Markets or fast growing markets. They represent 23.7%, which is a little bit down compared to last year, but this is mainly due to the fact that we have invested in mature markets and we have created a dilution, and this is not a reflection of the fact that these markets are not growing. The growth has been 4.7%, which is much higher than the 2% that the Group has posted. So we feel, as I said, very good about the two pillars and we consider that we have a good prospect for the years to come.
EBM: You've just announced the acquisition of Sapient. Tell us why you believe this is the right move and how it will fit into Publicis Groupe? I believe you've prepared something to demonstrate how this will work?
Maurice Lévy: We have covered the presentation of Sapient on various occasions, and this is the right time to make a focus on this acquisition. It is one of the most strategic that the industry has seen and probably the most important, with a $3.7 billion acquisition. To speak about this highly advanced technology company, I will use a low-tech presentation. So, the Sapient acquisition is closed.
Why Sapient is so important? Maybe let’s start with something which is extremely important, which is “Where are we today?” and “Where are the businesses going to?” There are two giant forces which are converging and transforming everything. One is the fact that that we are in an era of convergence: convergence of business models, convergence of digital, convergence of tools, everything is changing quite radically the way we are doing business. At the same time, we are in this empowerment age of consumers. And if our clients are not taking into account these two giant forces, they are at the risk of being ubered! This is what I call uberization coming from Uber.
So, this is leading to business and marketing transformations. The acquisition of Sapient is extremely important, first because it is changing the landscape in which we are operating and the size of the pie. The pie we are working on is a pie which is about marketing, storytelling, which is between $400b and $500b, and maybe $600b – nobody knows exactly what the number is. On top of this, there is consulting to help our clients transform their business: this is a market of $134b. And the technology services which represent close to a trillion [$900b]. So, this is a $1 trillion prize because, obviously, we are not offering all the technology services and we are not offering all the consulting services. So all in all, the area in which we will be operating will be doubling the size of the one in which we are operating today.
What is Sapient? Roughly 13,000 people, more than half of them in India with a fantastic distributed service platform. Sapient Nitro is the specialist of Omni-Channel. The one. Global Markets is about consulting and technology. Government Services also. This [Sapient Nitro] represents two thirds of Sapient; this [Global Markets and Government Services] represent one third.
If you look at the future of Publicis Groupe, you see that currently we have Publicis Worldwide, Saatchi & Saatchi, Leo Burnett, Prodigious (which is our production company), Starcom MediaVest Group and ZenithOptimedia (which are our media agencies), Publicis Healthcare Communications and MSL (which is our PR agency). We are the leader in Digital: 42% of our revenues are coming from Digital, and thanks to Razorfish Global and DigitasLBi. With the new acquisition of Sapient, we are becoming the leader in Business Transformation. And we will have, in a new platform which is called Publicis.Sapient: Sapient Nitro, Sapient Consulting, Razorfish Global, DigitasLBi, and all this is supported by our backbone platform which is called Re:Sources.
And as soon as 2015, we will Analogue which will be slightly below 50% and Digital which will represent more than 50%. We can say that we are more a Digital company and more an Internet company than an Analogue company. If we look now at the future, which is 2018 – so put an “8” here – what will be our number? On Digital we will have more than 60%, and this shows clearly that we are going to lead the industry in the most important part of our future, which is the Digital landscape.
EBM: Thank you for that very clear explanation. Let’s move on, let’s talk a bit about your outlook for 2015. Do you see a recovery, particularly with regard to your emerging market business?
Maurice Lévy: 2015 is the year where we will see Publicis back on growth. It will not be a linear year because the curve will be a little bit like this: we will start by going down a little bit, and we will have a firmer Q2, and then Q3 and Q4 with full steam. So, we expect Publicis to be back on its normal trend of growth delivery and we feel good.
We feel good not only about the Emerging Markets, despite the situation in China and some other issues in some other markets. We consider that Publicis should have a good performance in those markets. But, more importantly, we consider that, on Digital, we will have a better number. And we consider also that our creative agencies will deliver a better growth.
So, all in all, I think that the people who have been watching us for many years will feel reassured by the kind of growth that we will be delivering in 2015 which, as I said, will be starting from a low base and going up progressively, like a kind of snake, or a wave if you prefer. And, at the end of the year, we will be in a great, great position for 2016 because – but that's another story, as Kipling was saying – we will have also the Sapient acquisition.
EBM: And finally, tell us a bit about your strategic priorities for 2015. What are your objectives?
Maurice Lévy: The first and the most important task that we have to deal with in 2015 will be the integration of Sapient. That is a big, big task and we have already started and have some encouraging signs that this will go smoothly with a very good spirit from both teams. Publicis is known and is used to make acquisitions and to integrate them well, and I believe that that will be the case. We will have also to define the “go-to-market” for the newly created Publicis.Sapient. We feel that we have a very strong positioning, and this will help us.
And then there are the usual targets which are to strengthen our growth. This is something that I have already covered and we will definitely work hard on growth. But also on margin and implementing the ERP, and also working very hard on delivering the synergies. So we expect that 2015 will be a building year for delivering on all our objectives of the acquisition of Sapient, and we are extremely motivated and energized and we feel good about this and we believe that this is something that will work extremely well.
EBM: Maurice Lévy, CEO of Publicis Groupe, thanks very much indeed.
Maurice Lévy: Thank you.
