Paris, July 23, 2015 – Publicis Groupe, the world’s third largest communications group, reports first half results for 2015. Publicis Groupe CEO Maurice Lévy comments on Sapient, results and outlook.
– Company website: www.publicisgroupe.com
EuroBusinessMedia (EBM): Hello and thank-you for joining us. Publicis Groupe has just published its first-half results for 2015. I have the pleasure of meeting with the company’s CEO, Maurice Lévy. Could you please give us your view first of all of those results?
Maurice Lévy: We have published our numbers. They are always spectacular increases. We have our revenue which is up by 35%; it is about the same for our margin - slightly more, fortunately; our net profit is up by close to 40% and we have generated a cash flow above 55% compared to last year. Our margins are very good, despite the integration of Sapient, which is having a dilutive effect, we are exactly at the same level as last year. So all this is extremely positive and we feel very good about our numbers.
EBM: Breaking that down by geographical region now, could you give us an idea of what you believe was behind that growth in the second quarter?
Maurice Lévy: We had a pattern for our growth which was that we will start with a low organic growth; and we delivered a relatively low organic growth, which was at 0.9% - not great - in Q1. In Q2, it’s 1.4%. It’s, again, not great. It is in accordance with our plans, which is very good. And we have, for the second half, a strengthening of this rate. Regarding now the geographical breakdown, we have a relatively good growth in Europe: 2.3%. When you know the situation in Europe, we can consider that it’s relatively good. With some interesting countries, for example Germany: above 5%, nice. We have in the US, or North America, a situation which is less rosy. This is due to the last consequences of the headwind of last year. So, it’s a small growth, 1.2%. We have resumed a relatively good growth in APAC and we are hurt in Latin America - but I guess this is the situation of everyone -, and also a little bit in the Middle East. So, all in all, we have a configuration which is quite satisfactory.
What is more interest, if I may, is to see where this leads us. And in fact all the investment that we have been doing for years and the most recent one, Sapient, which I’m sure we will cover in a minute, have changed quite dramatically the profile of Publicis. And we have three formidable engines of growth. The first one is Digital. We have today more than 50% of our revenue which is derived from Digital. And Digital is growing quite well and it is expected to continue to grow in the next five years. So we have a very strong position as a global leader in that field. The second is the Sapient acquisition, which is making us the unique, only player covering the whole range of the value chain, from consulting to technology, digital obviously, commerce, marketing and communication. No one else can do the whole spectrum, we are the only one. And this is clearly a competitive advantage that we will try to benefit from. The third is that we have today slightly more than 50% of our revenue which is coming from the US. That’s very good because when you look at the history and you look at the forecasts for the next years, the US has a growth which is higher than the old continent and on top of this it is a more dynamic country, with less volatility than the emerging market. So, better than the old continent, better than the emerging market. That’s good. So we like that. So you have the three good engines which are taking speed and we believe that this will generate higher growth than the industry in the years to come. Starting as soon as next year.
EBM: Looking ahead then to the coming months, what do you believe the outlook is for organic growth and earnings?
Maurice Lévy: We have a 1.4% organic growth for Q2. We will see a steep change in Q3 and a strengthening in Q4. All this for the full year will lead us to be in the average of the market. So we feel very confident that we will be at least average of the market. Our objective has been to be just in the middle of the market, and in 2016 to outperform the market, to deliver a growth which is higher than the market so that at the end of our three-year programme, which is ending in 2018, we will deliver at least 200 basis point better than the market. So we feel quite good.
EBM: You mentioned the Sapient acquisition a moment ago. At the time of the acquisition you described it as strategically defining for Publicis Groupe. Do you still believe that to be the case?
Maurice Lévy: We have made two underestimations on Sapient. One, on the synergies that we can derive. And we have decided that we will probably have higher synergies, as soon as 2016, than we expected. The second is on the strategic front. We were quite confident that the Sapient acquisition will give us a competitive edge, extremely strong. And we were pretty sure that with their expertise on technology and their expertise on e-commerce will have a very good complement to our operation. The beauty today is that when we put all our operations together, we have a proposition which is extremely interesting for our clients.
Most of our clients are facing a challenge, which is the risk of being uberized or the risk of seeing a newcomer which can either destroy value or change the business model. And for that the need for a partner in order to organise their own transformation. And as I was saying a few minutes ago, we are the only partner that can help them on the whole value chain. And that is something that has been hugely underestimated in our vision. We thought it will be important, we see that it is critically important. So we are extremely pleased with that acquisition. On top of this, the integration is moving seamlessly and the chemistry with the team is just great.
EBM: Publicis Groupe is involved in a number of account reviews. Could you give us an update?
Maurice Lévy: There is an unprecedented movement of advertisers and we think that we have a number of accounts under review which is unheard of. The reason for these reviews are twofold. The first one is the fact that the economy is improving and the clients who had postponed the possibility of going to a review have decided that the time is right for the review. A second is obviously the change which is happening in our industry. There is huge change in programmatic databases, targeting, measurement, profiling, etc. All this information helps us to develop more precise marketing and we believe that we will be able to offer our clients some incredibly good solutions. So, we have been already making a few presentations. There are a few others which are coming up. We have roughly 5 billion of billings to defend. And there is 5 billion of other billings for which we have been invited, which can represent an opportunity. So I don’t know exactly what will happen. When you are in a competition you have a chance to win and a risk to lose. We feel confident that we may win more than we will lose and we cross our fingers. What I can tell you is that our teams are working very hard, they are energized, they are full of talent and enthusiasm and they are fighting hard. So I hope they will be rewarded.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much.
