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Be the leader of new client needs to win in the future: one-to-one consumer engagement at scale.
A sprint to accelerate the Groupe’s transformation.
Deliver 4% organic growth in 2020 and improve operating margin rate
by 30 to 50 basis points per year over 2018-2020.
Publicis Groupe [Euronext Paris: FR0000130577, CAC40] today holds its first investor day since 2013 to present its strategy and execution plan: Sprint To The Future. The Supervisory Board of Publicis Groupe has approved this plan and gives it full support to the strategy.
Through this Investor Day, Publicis Groupe wants to demonstrate its “how” to deliver greater value for its clients, talents and shareholders, at a time when the industry is facing several challenges.
Since 2014 and the acquisition of Sapient, the Groupe has been implementing a profound transformation. This adaptation to a changing environment is the trademark of Publicis Groupe as it constantly listens to its clients and anticipates their needs. Publicis Groupe has not waited to implement strategic change and is now uniquely positioned thanks to three key differentiation points:
Publicis Groupe has all the necessary assets to turn industry challenges into opportunities. This new model has started to produce some encouraging results, from new business, talent joining the Groupe, and solid financial results as reflected in 2017 when the Groupe delivered sequential improvement of organic growth quarter over quarter, and margin expansion, at constant restructuring charges.
Today, Publicis Groupe’s management team is going one step further, sharing its reality and presenting its strategy and execution plan for the next three years: Sprint To The Future.
Publicis Groupe has taken its clients challenges as the starting point of its transformation. Clients are evolving in a low growth environment; they are facing huge pressures on costs; and they are suffering from a lack of brand trust. New behaviors and disrupted media make it harder than ever for brands to engage with consumers. Major e-commerce activity has become a necessity for large companies, offering them the opportunity to gather first party data. At the same time, successful rising brands are adopting a direct-to-consumer strategy from the start, winning the hearts and minds of consumers, and thereby challenging traditional leaders.
In this context, each of the Groupe's clients will increasingly need to build one-to-one consumer engagement at scale. They have already started to shift their investments to obtain it. And Publicis Groupe delivers it. Interactivity with every consumer at each point of his / her journey has been the “Holy Grail” for advertisers for decades. Publicis Groupe is now able to achieve it as marketing and digital business transformation converge to connect data, content and technology in an omni-channel world.
Publicis Groupe has three strategic game changers to bring one-to-one consumer engagement at scale for all of its clients:
Additionally, Publicis Groupe has a unique ability to integrate these strategic game changers through its organization which makes its value proposition unparalleled and truly compelling.
This model is new, fresh and effective. It is generating amazing interest from clients, and has already led to significant new business wins in the last few weeks with Mercedes-Benz, Campbell’s and Marriott.
Bringing one-to-one consumer engagement at scale to all clients requires an organizational shift to become a platform. By leveraging the Power of One, Publicis Groupe will accelerate its transformation, as speed is of the essence in this fast-paced environment.
This execution plan is formed of 6 actions to be fulfilled by 2020, and a clear roadmap has been assigned to each workstream.
Publicis is implementing a platform for growth that will benefit:
- its clients with unparalleled capabilities covering all of their needs through a tailor-made relationships,
- its talent to increase their potential,
- and the Groupe as a whole, a unique ability to cross-sell and manage resources.
The Groupe aims to deliver greater value to shareholders through accelerated Headline diluted EPS growth over 2018-2020 resulting from three levers:
Stronger financial performance will position Publicis Groupe as the market leader in marketing and digital business transformation.
The objective is to post an accelerated organic growth rate over 2018-2020 with the aim to reach +4% in 2020, representing an incremental 900 million euros revenue over the next three years. This acceleration is expected to come from 1) direct revenue generated by the three strategic game changers for 650 million euros with the Top 100 clients and 2) revenue resulting from cross-selling with existing clients and new business with new clients for 600 million euros. Both should largely override the 350 million euros attrition of more mature business.
Publicis Groupe is also targeting to expand its operating margin rate by 30 to 50 basis points every year until 2020. This includes a 450 million euros cost saving plan, fully aligned with the Groupe’s strategy. These savings are rigorously assigned to identified areas of the cost base: 1) rightsizing of the mature businesses, 2) capacity and planning, 3) shared services, 4) country support functions, 5) real estate, 6) external spend. A dedicated execution plan for this program has been set up, with a governance team, one leader for each workstream and one sponsor from the Groupe’s Executive Committee.
The cost saving plan is aimed at financing a 300 million euros operational investment plan over 2018-2020 that will support the growth coming from the game changers. Those investments will be dedicated to the Groupe’s talent through hiring, training, development and re-skilling.
In the context of the Groupe’s own transformation, Publicis Groupe needs to expand its capabilities in data, dynamic creativity and digital business transformation. The Groupe may also add some acquisitions to complete its geographical footprint. Publicis Groupe therefore anticipates the investment dedicated to a bolt-on acquisition plan could amount to 300 to 500 million euros per year over 2018-2020. Over the years, Publicis Groupe has demonstrated its financial discipline on acquisitions, and, the Groupe expects the incremental profit from those acquisitions to contribute to enhance Headline diluted EPS growth over the period. The Groupe would sustain shareholder value creation through the implementation of a share buyback program, should the amount spent in acquisitions be at the lower end of the plan.
Publicis Groupe aims to deliver an accelerated 5% to 10% Headline diluted EPS growth per annum over the next 3 years, at constant currencies, thanks to continuous organic growth improvement, margin expansion and contribution of acquisitions to earnings.
Free cash flow generation is expected to remain strong and Publicis Groupe’s balance sheet will remain solid. With a dividend pay-out of circa 45%, dividend growth is due to accelerate over the next 3 years.
In a challenged market characterized by low growth and cost pressure, Publicis Groupe wants to show its progress at every step of the journey with a new set of indicators that can be followed both internally and externally.
The go-to-market strategy bringing together data, content and technology is aligned with clients’ needs and will benefit from the three game changers. Three KPIs are introduced to demonstrate the strength of the strategic game changers and the scale achieved with top clients: 1) the revenue they generate, 2) the share they represent with the top 100 clients, and 3) their share in the Groupe’s growth.
To execute on this new model and better manage resources, there will be an acceleration of the Groupe’s transformation as a platform. Indicators will therefore be 1) the number of global client leaders to strengthen top clients relationship, 2) the percentage of revenue coming from country model, and 3) the headcounts working for delivery platforms. The improvements this new organisation will bring to resource management should be tracked through six levers of the efficiency plan.
In terms of investment, the priority is to bring on board the people and capabilities to deliver the expected growth. As a result, the implementation of the investment plan to scale the game changers will be closely monitored. This will reflect the Groupe’s ability to attract new profiles but also to enable its talents to evolve with the new strategic game changers.
With these KPIs, Publicis Groupe will be able to improve its performance and better manage its resources. These indicators will be communicated every six months until the end of 2020. And they will be used internally on a day-to-day basis as levers for further improvement, in every area.
All the energy of the Groupe is mobilized to execute its strategy and to deliver greater value to its clients, its people and its shareholders. A dedicated incentive plan, fully aligned with the objectives presented during the investor day, will be implemented for the group of executives in charge of the execution of the plan.
Arthur Sadoun, CEO and Chairman of Publicis Groupe said :
“We are approaching this first investor day for Publicis Groupe since 2013 knowing that both our industry and our clients are being challenged.
For us it is a unique opportunity to show our reality and demonstrate our confidence in the future.
Thanks to the vision of Maurice Levy, we have not waited to change. Today, we have the assets, with a huge competitive advantage in technology, the vision, the organization thanks to the Power of One, and a future-facing management team to deliver greater shareholder value through accelerated organic growth and operating margin enhancement.
We can now bring to our clients what will make them win in the future: one-to-one consumer engagement at scale thanks to our three connected strategic game-changers in data, content and technology and consulting.
This give us a unique position on the market as no one else can deliver this range of expertise at scale in a connected way, with the necessary credibility with CMOs and CIOs. Thanks to our offer and our teams, we are seeing some promising results, with unprecedented new business momentum such as Mercedes-Benz, Marriott and Campbell’s.
We are now on a sprint to transform Publicis Groupe from a holding company to a platform through concrete actions, in order to deliver our offer at scale and gain in efficiencies.
We expect bumps in the road but we are committed to follow our plan, Sprint To The Future. We will monitor our progress through dedicated indicators and share them with our talent, our clients and our shareholders every semester.
No doubt, the present is complex. But the future will be bright for those who can help their clients accelerate their sales, reduce their costs and win the battle with new competition. And the only way to do that is to deliver marketing and business transformation, connected by data. This is where we are today and how we will lead our industry tomorrow.
I would like to thank our clients for their continued trust and outstanding partnership in this journey. A special ‘merci’ for those clients who have lent their voices to ours today in London to share their experience of our joint transformation journey.
I want also to thank everyone within our group for all of their efforts over the past few years, which make these latest steps in our transformation possible. And I want to say a big ‘merci’ to all of them for everything they will do during this Sprint to the Future to take Publicis Groupe to new heights”
All the financial information and projections in this presentation have been prepared excluding the application of IFRS 15 as of January 1, 2018, the application IFRS 16 as of January 1, 2019, and the impact of currency movements. Publicis Groupe does not anticipate those three items to impact organic revenue growth by 2020 and improvement in operating margin rate over 2018-2020. However currency movements may affect financial indicators in value, including revenue, operating margin, Headline diluted EPS, dividends and free cash flow.
Certain information contained in this document, other than historical information, may constitute forward-looking statements or unaudited financial objectives. These forward-looking statements and forecasts are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements and forecasts are presented as at the date of this document and, other than as required by applicable law, Publicis Groupe does not assume any obligation to update them to reflect new information or events or for any other reason. Publicis Groupe urges you carefully to consider the risk factors that may affect its business, as set out in the Registration Documents filed with the French Autorité des Marchés Financiers (AMF) and which is available on the website of Publicis Groupe (www.publicisgroupe.com), including an unfavorable economic climate, an extremely competitive market sector, the possibility that our clients could seek to terminate their contracts with us at short notice, the fact that a substantial part of the Group’s revenue is derived from certain key clients, conflicts of interest between advertisers active in the same sector, the Group’s dependence on its directors and employees, laws and regulations which apply to the Group’s business, legal action brought against the Group based on allegations that certain of the Group’s commercials are deceptive or misleading or that the products of certain clients are defective, the strategy of growing through acquisitions, the depreciation of goodwill and assets listed on the Group’s balance sheet, the Group’s presence in emerging markets, exposure to liquidity risk, a drop in the Group’s credit rating and exposure to the risks of financial markets.
Publicis Groupe [Euronext Paris FR0000130577, CAC 40] is a global leader in communication. The Groupe is positioned at every step of the value chain, from consulting to execution, combining marketing transformation and digital business transformation. Publicis Groupe is a privileged partner in its clients’ transformation to enhance personalization at scale. The Groupe relies on ten expertise concentrated within four main activities: Communication, Media, Data and Technology. Through a unified and fluid organization, its clients have a facilitated access to all its expertise in every market. Present in over 100 countries, Publicis Groupe employs around 98,000 professionals.
Vice-President, Investor Relations & Strategic Financial Planning
+ 33 (0) 1 44 43 77 88
DIRECTOR OF GLOBAL COMMUNICATIONS PUBLICIS GROUPE
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