Coming Off A Weak 2015, Publicis Expects 2016 To Be 'Year Of Transition'

Publicis Groupe’s 2015 results showed a marked slowdown in the emerging markets and a recovery in Europe that was below expectations. The Groupe's "mixed performance" amid the so-called “Mediapoolza” account review activity last year also hindered its bottom line with Publicis largely consolidating its position with clients Coty and Citi while losing the U.S. media accounts of Procter & Gamble and Coca-Cola. At the same time, Publicis won Taco Bell, Visa, Etihad, and VF, parent company of Timberland and The North Face.  

In addition, Publicis suffered, with clients "massively" cutting their spending. "We are better suited for the digital world than any of our competitors, but still have a long way to go," says Publicis Chairman Maurice Levy. "2016 will be a year of transition during which we anticipate to see modest organic growth and focus on building foundations that will allow us to fire on all cylinders in 2017."  

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Publicis Groupe’s consolidated revenue for 2015 rose 32.3% to 9.6 billion euro ($10.9 billion) up from 7.25 billion euro ($8.2 billion) in 2014, while the fourth quarter was up 27.2% to 2.7 billon euro ($3.1 billion). At constant exchange rates, growth was 18.9%, with organic growth up1.5%, largely due to the contribution of digital activities. Q4 organic growth was 2.8%. 

North America revenue grew by 48.5%, mostly due to the Sapient acquisition and the impact of exchange rates, and organic growth was 2.4%. Free cash flow rose 31% to exceed the one billion euro mark for the first time in the Groupe's history. 

Net debt stood at 1.9 billion euro ($2.1 billion) at December 31, 2015, after the cash-positive 985 million euro ($1.1 billion) at year-end 2014. The swing in the net financial situation was mainly due to the acquisition cost of Sapient. 

Publicis is transforming its entire organization in order to better compete in today's evolving landscape, Levy said, adding that although he is "having fun," he will definitely hand over the company to his unnamed successor in May 2017. 

Under its reorganization, the top 50 clients in Publicis' top 20 countries will each be accompanied by a chief client officer, and these CCOs will report to a chief revenue officer. For all other countries, a single structure called Publicis ONE will combine all of these solutions -- creative, media, digital, healthcare - in each country.  

"We came from a low growth," says Levy. "[2015] was no paradise [where] everything was rosy. We want to be cautious and decided internally to have modest internal growth objectives. We cannot ask our teams to be building a new organization and at the same time to grow faster." 

Another area of opportunity for the Groupe is to expand beyond advertising. Publicis is pursuing the $1 trillion-dollar IT market, seeing IBM and Deloitte as peers just as much as Omnicom and WPP.  

"Let's be clear -- we are not competing with Deloitte, Accenture, IBM [among others]," says Levy. "We are only the fringe" but the "acceleration of convergence and lot of new players offering value services, access and mobility [results] in an unprecedented speed of change," says Levy, adding these new players enter with less overhead. "We don't pretend to be one of key players in each of these pies but what we expect to do [is to be] at the convergence at all of these pies," he says. "We will not be competing on price, but helping them shape differently their approach, their organization and their approach of technology and marketing." 

One bright spot for the holding company is Publicis90, its start-up incubator program.  As of February 8, more than 2,600 people have registered to enter their projects and more than 1,000 have completed their applications to be one of the 90 projects or start-ups that will be selected and funded by Publics Groupe. The site has received more than 50,000 visitors in less than one month.  

"What is striking is the geographical breakout," say Publicis executives. "Participants come from more than 80 countries. Not only are we very strong in France, US, UK, the usual big markets of the Groupe, but we have also impressive traction in India, Brazil, Israel." 

Employee participation is also very strong, with more than 25% of the total participants. "Especially in US, UK and India. It is clearly more than what we expected."

 

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