Publicis Groupe reported that consolidated revenue grew 4.3% to $9.625 billion in 2014, driven by stronger fourth-quarter organic growth of 3.2%. Organic growth for the full year was a somewhat tepid 2%. Digital activities accounted for 42% of its total revenue for the year.
But the Groupe is "back in growth" mode, thanks to its acquisition of Sapient, which was completed February 6th. That’s according to Publicis Groupe CEO Maurice Levy, speaking on a conference call with analysts about fourth-quarter and full-year 2014 financial results for the Paris-based holding company.
"The big story of 2015 will therefore be the integration of the Sapient.Publicis teams which are renowned for their ability in this field," said Levy, referring to the digital shops that are being reorganized under the Publicis.Sapient banner and that will be managed by Sapient CEO Alan Herrick.
"The initial work of the joint integration teams has been very promising in terms of the integration itself but also in terms of the synergies expected."
Looking forward, the Groupe expects this pattern to continue, with analog revenues continuing to fade as digital reaches 50% this year, in large part due to the Sapient acquisition.
"Companies are faced with two major changes of paradigm that entail a radical change of business model,” said Levy. "Changes that are driven by digital developments and innovation. Firstly, the convergence of models, tools and solutions, and, secondly, new forms of consumer behavior, with consumers better informed, with greater access to communications, giving them a prominent role in the economic arena," said Levy. "To avoid their businesses being 'uberized,' companies find themselves having to rethink their business model, their marketing and even the channels through which they distribute their products and provide services. For them as for us, transformation is the only way forward."
Regionally in Q4, emerging markets were strong performers (+10.5%), notably with Brazil posting 7.0% growth, Russia 8.5%, India at over 30% and Greater China recording an 8.4% spurt. At the same time, Mexico was up 21.0%, Turkey grew by 4.0% and Australia by 5.2%. Europe, however, continued to be "patchy" with total Europe (excluding Russia and Turkey) declining 1%. More specifically, Germany grew 2.1%, while France and the UK recorded declines of 1.2% and 7.4% respectively, while southern Europe was virtually flat at 0.3%.
Publicis considers the U.S the true "emerging country" thanks to strong digital growth, though the region only posted 2.8% organic growth in the quarter. That said, the Groupe expects the U.S. to post increasingly stronger numbers in the coming quarters, though gradually at first with a marked pick-up in the second half before reaching stronger numbers in 2016.
Latin America reported strong Q4 growth at 14.9%. The rest of the world grew by 11.4%. "In this context, the good performance of all our indicators underscores the efficiency of our business model, in particular our 16.4% margin, the 4.7% increase in [full-year] headline net income, and our vastly improved cash-positive situation (close to one billion euro)."
The Sapient deal is influencing managerial changes. Last fall, Levy and the Supervisory Board approved the creation of an additional body, an enlarged management board called “Directoire+” which comprises Laura Desmond (CEO, Starcom MediaVest Group), Steve King (CEO, ZenithOptimedia), Arthur Sadoun (CEO, Publicis Worldwide), and Rishad Tobaccowala (Chief Strategist, Publicis Groupe). The idea is to associate a new generation of managers with the group’s inner mechanisms and decision-making processes.
At the same time, The P12 Executive Committee has also been reinforced with the addition of Tom Adamski, Axel Duroux, Robert Senior, Luke Taylor, Mark Tutssel and Jean-Francois Valent.
While there may not be any deals as big as Sapient in the offing, Publicis is keeping its pocketbook open. "The Groupe intends to continue its policy priority of allocating investments in talent to growing activities or regions," says Levy. Still, "we will stay where we feel we have expertise and help our clients reposition their markets." He does not see Publicis, for instance, becoming the next Accenture.
"The big challenge of the year will be the integration of Sapient, but Publicis Groupe is renowned for its ability to successfully integrate acquisitions and deliver synergies. The Groupe is confident about the roll-out of its various projects in 2015 and about the building of the Publicis.Sapient platform which will reposition it in forward-looking markets."