EuroBusiness Media (EBM): Publicis Groupe, the world’s third largest communications company, has just released its annual results for 2017. I’m joined by CEO, Arthur Sadoun, hello, thank you for being with us.
Arthur Sadoun: Bonjour Nadia
EBM: What were the highlights of the year?
Arthur Sadoun: I guess the least that we can say is that 2017 has been a challenging year for our industry. I won’t come back to everything that has happened, because it will take two hours of our time which you don’t have, I do, but you don’t!. I will just tell you that at Publicis we are focused on two things: delivering and transforming and actually delivering while transforming. Making sure that we have robust numbers and at the same time accelerate our transformation to be in line with the needs of our clients.
EBM: Let’s start with that word, delivery. Looking at your financial results, how did you deliver?
Arthur Sadoun: When you look at our financial results, the first thing you need to look at very closely is organic growth and how can we bring sequential improvement in our organic growth. We started the year in Q1 with a -1.2%, we then moved in Q2 with a progress +0.8%, Q3 with a +1.2% and we are actually delivering in Q4 +2.2%. We said very clearly in Q3 that you would see an improvement, a sequential improvement from H1 to H2. This is what we are delivering with an annual growth of 0.8% which is actually better than last year.
EBM: And in terms of geographies, is there something you’d like to share?
Arthur Sadoun: I have got to mention the US. We had a very good Q4. We moved to +4.5% in Q4, coming from 3.5% in Q3. This is extremely important for us. Not only because the US is 50% of our business, but because it is a place where our transformation has been starting now for the last two years and you can already see some very positive benefit and a very good sign that we have the right dynamics.
EBM: And what about the margins?
Arthur Sadoun: We said very clearly that we have to accelerate on organic growth, but at the same time, “en même temps” as some would say in France, we need to bring our cost base down and gain in terms of competitiveness. We are delivering, in 2017, 40 basis points of improvement on our margin, at comparable restructuring costs, which means that we are 15.5% profit, which is for us a good number because it was important for us to demonstrate our ability to increase our margin while we are having a very reasonable growth. The good news about that is that today Publicis is more solid than it was a year ago and a demonstration of that is that we have decided to increase our dividend to 2 euros, which is an increase of +8.1% compared to last year.
EBM: You mentioned your transformation as the other highlight of the year, tell us more about that.
Arthur Sadoun: Transformation is a terrible word. The problem with transformation is that everybody speaks about it. The question is how do you act upon it. If you look at our clients, they are facing several disruptions and we have a very simple vision at Publicis. We think that we can be the market leader in marketing and business transformation. We can be the one that helps our clients not only transform their marketing by reinventing the consumer journey, but also help them to understand what in the business model needs to be transformed through technology to be more efficient. This is what we are bringing today to our clients on a day-to-day basis and this is starting to make a huge difference in the value we bring to them and, by the way, the way we get organised.
EBM: Can you elaborate a bit on the results of this transformation?
Arthur Sadoun: I’m not going to tell you that everything is perfect and that we are already at the end of our journey - we are actually at the beginning. But we are seeing very encouraging results. And at a time again where our industry is being challenged, we see a great sign of attractiveness, which is extremely important for us. We need to be attractive with talent, but also with clients. On the talent front, our first priority is to retain and train our best talents, but at a time of transformation, bringing new talent on board is absolutely critical and if you look at the list of people that have joined Publicis – and I won’t go into detail now – during this year, to actually follow the model and the project you have, it’s a great sign of how we can be attractive in a market that is highly competitive on talent. I will take maybe one example. Nick Law, who is the Chief Creative Officer of R/GA globally, is joining Publicis to do the same at group level. He is considered as maybe the most iconic creative when It comes to the alchemy between creativity and technology. Attracting this kind of talent means that at Publicis we are on the right track to reinvent our industry. The second factor is new business. I’m not going to give you the list of everything we have won, it would take time. We have lost some by the way, but we have won more than we lost. And I think what is important to note there is that we have been winning on the marketing side. I will take a few examples, Southwest Airlines, for example, Lionsgate in the US, we won the P&G pitch in the UK which was the pitch of the year, we have done great things with Loreal also and on the creative front with Diesel, but we have been winning on the marketing side. But we have also been winning on digital business transformation. You maybe heard about McDonalds, that we won with Capgemini, there are other wins that were important for us, but one is more significant than others in the recent two weeks, maybe because it’s French, but also maybe because the challenge there is incredibly strong, is Carrefour. We have been lucky enough to be chosen by Carrefour to help them out in their digital business transformation, in reinventing the omnichannel model. And what is interesting there is the reason why we have been chosen, obviously because we are very strong in consulting and technology, but also because we understand the brand, because we understand the consumer and we can make sure that we do this transformation in a connected way.
EBM: So, what are your thoughts for the future of Publicis Groupe?
Arthur Sadoun: There is a short-term future and a mid-term future. The short-term is definitely the investor day on the 20th of March, where we will review our targets for growth and profit, while the 2013 objective will have to be revisited, as all the market knows, it is important for me to share already two good news: The first is when it comes to growth, because we have invested in data, technology and talent we are committed to deliver in 2018 a better growth than in 2017. It’s an achievement in the context and, by the way, when you look at what the competition is saying, it is something that we believe will be a strong sign of the fact that we are progressing with our model. The second good news is on profit. As I told you, we are very serious and committed about the reduction of our costs. Not only because we need to reinvest, would it be in IT, in data or in talent, but also because we want to make sure that we put in place a multi-year programme to reduce our costs and increase our margin. And those progress will be felt already in 2018.
EBM: And what about the mid-term then?
Arthur Sadoun: I have to admit that I’m pretty confident on the mid-term for three reasons. I think that we have three very strong competitive advantages. The first is technology. Thanks to Publicis.Sapient, we can bring digital business transformation to all of our clients. That’s really changed the kind of relationship and value we are bringing through the addition that I just mentioned between marketing transformation and digital business transformation. The second is the Power of One. Our ability to break the silos as we did is really paying off - look at what is happening in the US - and is giving us a huge advantage to arrive with an end-to-end solution for each of our clients. The third is our people. As you know, we have been through a transition phase with Maurice Lévy becoming the Chairman of the Supervisory Board and CEO of the Directoire, we have put in place government bodies that are working very well together and I think that we have the team for the future. And by the way, I will use this opportunity to thank them, because as I said they have been doing a terrific job and we are extremely confident for the future, even though it won’t be easy, but that’s the name of the game.
EBM: Arthur Sadoun, thank you very much for having spoken to us.
Arthur Sadoun: Nadia, thank you very much, sorry for the weather, but it’s still Paris.
EBM: Exactly. Thank you.
