EuroBusiness Media (EBM): Publicis Groupe, the world’s third largest communications company, has just announced its annual results for 2015. We’re going to discuss them now with Maurice Lévy, CEO. What do you think are the most important points to take away from 2015? In some ways, it’s a year that happened as you expected, in other ways there were some surprises.
Maurice Lévy: It’s a paradoxical year. We are posting some great numbers. Our revenue is up by 32%, at €9.6bn plus. We have a margin which is close to €1.5bn at 15.5%. We are delivering a cash flow of €1.097bn, a record, up by 31%. And at the same time, I feel personally a little bit bad because the level of our organic growth is not where we would like it to be. We are posting a relatively better number than what we anticipated, because at 1.5% for the full year, it’s better than the 1% we indicated to the market, with a fourth quarter which is up by 2.8%. Nevertheless, and despite the fact that these numbers are better than anticipated, we consider that we can do much better, and we will do, obviously.
EBM: And I’m sure it feels good to surpass the objectives you set for yourselves in the fourth quarter as well. What about geographical trends in 2015?
Maurice Lévy: To be honest, there is not much to write home about. When you look at the regions, they are all in about the same bracket. Except Latin America which is facing some very important difficulties; and China, which is unstable; with the good news of India which is improving. Unfortunately for Russia, they are hit by two elements: the sanctions as well as the oil price which is going down sharply. Europe, which we expected to come back and to grow, has been quite disappointing: with some bright spots like Germany or France – relatively good; Spain, which is coming back; and unfortunately, in our case, the UK, which is still facing some difficulties. The US, relatively solid. So all in all, not much to say.
But if there was something I would like to insist on, it’s clearly about digital compared to analogue. Analogue is declining everywhere, including in our business. Digital has been a very good year. The fourth quarter has been up by 8.8%. When you know that in total we had a growth of 2.8%, you can imagine how good it is to have 8.8% in digital, and for the full year 5.4%. Digital today represents 52% of all our revenues, so we feel quite good about the investment we have made, and the shift to digital which is something for which we believe we made the right move since 2006.
EBM: Of course, it can be influenced by a lot of outside factors, but what would you say today are your expectations for performance in 2016?
Maurice Lévy: 2016 is a year of transition. We have changed our organisation dramatically. Not for the sake of changing, and not because things were not going well. Simply because the world is changing dramatically, and our clients are changing also. So we have decided to come back to the roots of what our business is all about, which is taking care of our clients and putting the clients at the heart of everything we do, and bringing solutions to the client.
When a client is coming to us, he’s coming for a problem to be solved. And therefore, we will be managing the client in an integrated way. And we will bring to the client the creative solutions through Publicis Communications, the media or connection solutions through Publicis Media, and technology, digital or consulting solutions through Publicis.Sapient.
What is interesting is that in that year of transition, we are not trying to reach a very high level of growth; we are trying to build very solid foundations, in order to be able to fire on all our cylinders in 2017. So, we expect some moderate growth, we will catch up progressively, and we will address the client issues with a new Publicis, which is very well organised to best serve our clients.
EBM: To hear you, in 2016 the re-organisation is really going to drive much of the year. Where are you in the plan? Has it already begun? Is it going to expand this year?
Maurice Lévy: Most of the key decisions have been made. It is fully up and running for at least Publicis.Sapient and Publicis Health. We have Publicis Communications, which is already well organised; everyone knows exactly what he or she has to do. And there is still work in progress for Publicis Communications and for Publicis Media. We believe that all our solutions will be up and running by the end of the first half of 2016. So we are confident that the system will work pretty well for the benefit of our clients somewhere between the end of Q1 and in the course of Q2.
EBM: And you will see then the first benefits of this reorganisation you’re really expecting in the first half of this year?
Maurice Lévy: We expect it to deliver some very good numbers. We expect it to grow progressively. So we don’t expect to see a sea change from day 1. We believe it will take a little bit of time and we will be more in a transition mode. And we will fire on all our cylinders as soon as January 2017. So it’s in 2017 that you can expect the full benefit of what we are implementing.
And I don’t believe that there has been ever a transformation which is as big as the one we are doing. I think what is important is to see why we are doing it. And in fact, we are not doing it for our own purpose. We believe that the world is changing massively, that this has an impact on the way our clients are operating. There is this famous uberisation where people can lose their jobs or can lose their business almost overnight. And we need to help our clients transform their business models and their marketing. We have all the skills, all the talent and all the means to help our clients transform themselves. That’s the reason why we have changed our organisation. This is what is at the core of what we are doing. So, you can’t change something as big as a company like ours of 76,000 people without taking a little bit of time. And you need to make it work progressively and this is what we are doing.
EBM: So this is, clearly, an enormous investment in Publicis Groupe that will, as you said, take time. In 2016 and 2017, you will start seeing the concrete result. Let’s talk about what you might see ahead for 2018, which might be another growth year.
Maurice Lévy: We have made some great plans for 2018 and we believe that, normally, with the kind of reorganisation that we are putting in place, we will start, certainly from mid-2017 and at full speed in 2018, to outperform our competitors. This is where we will see the difference. This is where we will see the benefit of everything that we have put in place and that we have invested in. So we have some good plans regarding growth and regarding margin, and we don’t anticipate any change in those plans.
EBM: And can you update us now on capital allocation, and perhaps also tell us something about Cheil communication?
Maurice Lévy: I read something in the press, and this looks like speculations, and obviously, it’s normal that we don’t comment on speculation.
Regarding capital allocation, it is the right time to say that we are proposing to our AGM to raise by 33% the dividend for this year, reaching a level which is close to 40%. And we are on our way to the 42% that we promised to the market. With €901m of net profit allocated to our shareholders, we will pay a dividend of €1.60, which is a very good one – as I said, up by 33%.
We have still a debt level which is close to €2bn at the end of 2015, and one of the first things that we will need to do is to address the debt and deleverage the company, plus some acquisitions that we have to make. So we feel that we are doing the right thing to continue to increase the value of our shareholders and to make sure that they are benefitting from our investment. So, we will probably revisit the allocation later in the course of 2017 or 2018, based on the speed at which we will be deleveraging the company.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much.
Maurice Lévy : Merci, et au revoir. A bientôt.