Accelerated transformation and record year,
both commercially and financially
Regulatory News:
Publicis Groupe (Paris:PUB):
- Publicis Groupe ranked No. 1 in new
business league tables (1)
- Operating margin up 60 basis points;
Headline diluted EPS up 10.3% (2)
- Organic growth of +0.8%
(3) in 2018, despite attrition in traditional advertising
in the USA
- Strategic and operational KPIs ahead
of plan, with strong contribution to growth from strategic game
changers (+28%)
- Share buyback program of €400
million
- Publicis Groupe confirms its 2020
objective of +4% organic growth
2018 Results
(EUR million)
2018before IFRS16
2018 vs 2017at constant exchange ratesbefore
IFRS16
Revenue (4)
9,951 +1.1%
Net revenue (4)
8,969 +0.1%
Organic growth excluding PHS
(3)
+0.8%
Operating margin
1,501 +5.0%
Operating margin rate
16.7%
Headline group net income
1,107 +12.2%
Headline diluted EPS (euro)
(4)
4.72 +10.3%
Free Cash Flow (4)
1,311 +2.4%
Q4 2018
Net revenue
€2,492 m
Reported growth
+0.4%
Organic growth excluding PHS
(3)
+0.5% (1) Source: Goldman
Sachs, JP Morgan, RECMA, R3 (2) At constant exchange rates (3)
Organic growth of Net revenue, excluding PHS (4) See definitions
Arthur Sadoun, Chairman and CEO of Publicis Groupe:
“2018 was a productive year for Publicis. We clearly led the
change in our industry, demonstrating that we have the model to win
today and tomorrow, and a transformation roadmap to continuously
increase shareholder value.
Thanks to the vision of Maurice Levy and to the hard work of our
teams, we are posting a record year both commercially with a
disproportionate share of new business wins, and financially with
the highest EPS ever.
There are four key highlights of 2018: new business, financial
performance, organic growth and transformation.
First, the move that we are operating from being a communication
partner to a marketing and business transformation partner for our
clients is making a massive difference commercially. We have
outperformed the market in new business on every front. At Groupe
level, we ranked first globally as highlighted in several reports,
including JPMorgan and Goldman Sachs. Publicis Media is leading the
media industry as stated in RECMA’s ranking. Finally, in the
creative field, our two biggest networks Publicis Worldwide and Leo
Burnett ranked first and second respectively in R3’s new business
reports.
Our model connecting data, dynamic creativity and technology is
working beautifully and fits the current and future needs of the
clients. This is why we won the majority of the biggest pitches of
2018, such as Daimler, Campbell's, Marriott, Carrefour, Cathay
Pacific, Smucker's, GSK and Fiat-Chrysler. These last two wins
represent more than one billion dollars in billings each.
Second, we over-delivered financially while we were
transforming.
We improved operating margin rate by 60 bps compared with 2017
reported figure, above our objective of a 30 to 50 basis point
increase. Operating margin rate reached 16.7 % before IFRS16. It is
important to mention that we did not deliver this performance at
the expense of tomorrow’s growth. We realized 194 million euros of
savings, thanks to all our work on structure simplification and the
rightsizing of some operations. Out of this amount, 109 million
euros were reinvested in our talents and our game changers.
Headline diluted EPS grew by 10.3 % at constant currency, above
the top end of our target of 5 % to 10 % growth. Therefore, we will
propose a 2.12 euro dividend per share representing a 45% pay out
as committed at the investor day.
Finally, free cash flow remained very strong above 1.3 billion
euros, fueled by a positive change in working capital for the
second year in a row. This allowed us to turn net cash positive at
196 million euros at the end of 2018, only four years after the
3-billion-euro acquisition of Sapient. This is a big strength at
this time of economic uncertainty. As the amount spent in M&A
was below our objective in 2018, and as committed at the investor
day, we announce a 400 million euro share buyback.
Third, excluding PHS, as the expected disposal was completed,
full year 2018 organic growth was + 0.8 %, with H2 at + 1.3 % and
Q4 at + 0.5 %. We benefitted from the exponential growth of our
game changers representing an incremental revenue of close to 240
million euro, with the positive impact of new business ramp up. But
we suffered from the usual year-end volatility and the
higher-than-expected attrition in traditional advertising at 150
million euro, mainly from several FMCG clients in the US. This is a
broad industry challenge as competitors, our clients themselves,
and the press have been saying. We are taking strong actions to
overcome it.
The fourth thing you should take out from 2018 is that we are
ahead on all the strategic and operational KPI of our
transformation to become the market leader in marketing and
business transformation. The best evidence is our game changers
performance. Data, dynamic creativity, and business transformation
grew by 28%, and represent now 12% of the Groupe net revenue.
So today, we have the financial robustness, the model to win in
the future and a clear roadmap for the next steps of our journey.
We now need to deliver strong and profitable organic growth.
In this challenging context, we are making the demonstration
that we have built the model of the future and are highly
competitive, while working to create more value for our
shareholders.
This was the Directoire’s commitment for 2018 and it is what we
are delivering today.
We confirm the 4% organic growth objective in 2020, and the 30
to 50 basis point margin improvement both in 2019 and 2020.”
* *
*
Publicis Groupe’s Supervisory Board met on February 6, 2019,
under the chairmanship of Maurice Lévy, to examine the annual
accounts for 2018 presented by Arthur Sadoun, CEO and Chairman of
the Management Board.
KEY FIGURES
EUR million, except per-share data
and percentages 2018
(1)after IFRS 16
2018before IFRS 16
2017before IFRS 16 Data from the Income
Statement:
Net revenue (2)
8,969 8,969 9,332
Pass-through revenue 982
982 914 Revenue (2) 9,951 9,951 10,246
Operating margin before Depreciation & Amortization 2,049 1,652
1,666 % of Net revenue 22.8% 18.4% 17.9% Operating margin 1,523
1,501 1,505 % of Net revenue 17.0% 16.7% 16.1% Operating income
1,303 1,281 1,316 Net income attributable to the Groupe
919 944 862
Earnings Per Share (EPS) 4.01 4.12 3,81 Headline diluted EPS (3)
4.61 4.72 4.50 Dividend per share (4) 2.12
2.12 2.00 Free Cash Flow
before changes in working capital requirements
1,158 1,182 1,287
EUR
millionData from the Balance Sheet
Dec. 31, 2018after IFRS 16
Dec. 31, 2018before IFRS 16
Dec. 31, 2017before IFRS 16 Total assets 27,080
25,359 23,780 Groupe share of Shareholders’ equity 6,853 6,866
5,956 Net debt (net cash) (288)
(196) 727 (1) The financial
statements at December 31, 2018 were prepared with the early
application of IFRS 16 (use of the prospective method without
restating the previous year) (2) In accordance with IFRS 15
applicable as of January 1, 2018, comparative data from the
previous period have been restated. Revenue is equal to Net revenue
plus pass-through revenue (3) Net income attributable to the
Groupe, after elimination of impairment charges / real estate
transformation expenses, amortization of intangibles arising on
acquisitions, the main capital gains (or losses) on disposals,
change in the fair value of financial assets, the impact of US tax
reform and the revaluation of earn-out costs, divided by the
average number of shares on a diluted basis. (4) To be proposed to
the shareholders at their AGM of May 29, 2019
It should be noted that, unless otherwise specified, the
following comments on Income Statement and Balance Sheet data are
before application of IFRS 16.
IFRS 15 ON REVENUE RECOGNITION
Publicis Groupe has been applying IFRS 15, the accounting
standard on revenue recognition, since January 1, 2018. The 2017
financial statements have therefore been restated for the purposes
of comparison with revenue since the standard came into force. This
has increased revenue since certain costs – that are directly
re-invoiced to clients – are no longer set against revenue. These
costs mainly concern production and media activities, as well as
various miscellaneous costs incumbent on clients.
In this context, as these items that can be re-billed to clients
do not come within the scope of analysis of operations, Publicis
Groupe has decided to focus on a different indicator, i.e. revenue
less pass-through revenue or Net revenue, which is the most
relevant indicator in terms of measuring the Groupe’s operational
performance.
The table below provides a detailed account of revenue reported
in respect of 2017 before the impact of IFRS 15, as well as the
2017 figures restated after applying IFRS 15, i.e. Net revenue
and Revenue.
EUR million Q1
2017 Q2 2017
Q3 2017 Q4 2017
2017 Before IFRS 15
Reported revenue 2,328 2,515 2,264 2,583 9,690
After IFRS 15 Net revenue 2,267
2,397 2,185 2,483 9,332 + Pass-through
revenue 222 235
206 251 914
= IFRS revenue 2,489
2,632 2,391 2,734
10,246
A breakdown of 2017 Net revenue by quarter and by region, as
well as the main items of the 2017 half-yearly and annual results
including the impact of IFRS 15, was provided in the press release
dated July 6, 2018 (available on the Groupe’s website at
www.publicisgroupe.com).
IFRS 16 ON LEASE AGREEMENTS
Publicis Groupe chose to apply IFRS 16 “Leases” early from
January 1, 2018.
Pursuant to IFRS 16, all leases are now recognized by recording
a right-of-use asset and liability equal to the present value of
the future payments. The right-of-use assets, related to leases,
are amortized over the term of lease agreements.
The Publicis Groupe contracts that come within the scope of this
standard concern the following:
- mainly property leases: Publicis leases its offices in most of
the cities where it operates;
- and, to a lesser extent, the use of advertising space within
its advertising sales business (via advertising space concession
contracts with guaranteed minima), and the leasing of vehicles and
IT equipment.
Publicis Groupe has opted for the cumulative catch-up approach
which consists in booking the cumulative impact of the initial
application as an adjustment to opening equity, considering that
the right-of-use assets are equal to the amount of lease
liabilities adjusted by the amount of prepaid rent. The opening
balance sheet at January 1, 2018, after application of IFRS 16, was
presented in Note 3 to the financial statements at June 30, 2018.
Furthermore, the 2017 Income statement has not been restated. When
reporting its annual results for 2018, the Groupe has published
IFRS 16-compliant financial statements but also its financial
results before application of this new standard for the purposes of
comparison with its performance in 2017.
NET REVENUE IN Q4 2018
Publicis Groupe’s Net revenue in Q4 2018 was 2,492 million euro,
up 0.4% from 2,483 million euro in 2017. At constant exchange
rates, growth was +0.2% after inclusion of the positive impact of
exchange rate variations (5 million euro or +0.2%). Net
acquisitions contributed 11 million euro to Net revenue in Q4 2018
(including the deconsolidation of Genedigi from January 1,
2018).
Organic growth was -0.3% in Q4 2018. When PHS is factored out,
growth was +0.5% in the fourth quarter. Growth was therefore slower
than in Q3 due to negative impact of the usual year-end volatility
and the higher-than-expected rate of attrition in the traditional
advertising business, notably in the FMCG sector in the US. Organic
growth nonetheless benefited from the ramp-up of accounts won in Q1
2018 - notably those of Daimler, Carrefour, Campbell’s and Marriott
– which contributed 150 basis points.
Breakdown of Q4 2018 Net revenue by region
EUR
Net revenue
Reported Organic
Organicgrowthexcl. PHS million
Q4 2018 Q4
2017 growth
growth Europe 753
718 +4.9% +4.4% +4.3% North America 1,260 1,253 +0.6%
-2.6% -1.1% Asia Pacific 277 300 -7.7% -2.8% -2.8% Latin America
110 126 -12.7% -1.9% -1.9% Middle East & Africa
92 86 +7.0%
+6.8% +6.8%
Total
2,492 2,483
+0.4% -0.3%
+0.5%
NET REVENUE IN FULL YEAR 2018
Publicis Groupe’s Net revenue for the full year 2018 was 8,969
million euro, compared with 9,332 million euro in 2017, i.e. a 3.9%
decrease. At constant exchange rates, growth was +0.1% but the
actual impact of exchange rate variations was a negative 4.0% or
374 million euro. Net acquisitions contributed 5 million euro to
Net revenue in 2018 (including the deconsolidation of Genedigi from
January 1, 2018).
Organic growth was +0.1% in 2018. It was +0.8% without PHS. This
includes 28% growth of Net revenue from the Strategic Game
Changers, i.e. an organic contribution to Net revenue of close to
+240 million euro, but also the 150 million euro impact of
attrition.
Breakdown of 2018 Net revenue by sector
Publicis Groupe made effective the disposal of Publicis Health
Services in January 2019. This entity services CSOs (Contract Sales
Organizations), a business that does not exist in other healthcare
communications networks that mainly specialize in outsourcing. By
its very nature, this business is highly volatile and developments
in the healthcare sector have led clients to make last-minute
adjustments resulting in the postponement or even the cancellation
of campaigns.
The pharmaceutical industry is undergoing radical transformation
throughout the world. At a time when medical research and sales
have moved on from the blockbuster era to one of more specialized
therapies, it has become necessary to adapt its marketing and to
propose measures that target patients and prescribers much more
specifically. Publicis Groupe’s offering – which is articulated
around data, dynamic creativity and digital business transformation
– is clearly aligned with these needs.
Publicis Groupe remains determined to provide its clients with
the best possible offering for their digital transformation and
this will require investment in healthcare-related consulting, data
and technology.
Breakdown of 2018 Net revenue by region
EUR
Net revenue
Reported Organic
Organicgrowthexcl. PHS million
2018 2017
growth
growth Europe 2,622
2,596 +1.0% +1.4% +1.3% North America 4,795
5,032 -4.7% -0.8% +0.5% Asia Pacific 924 1,037 -10.9% -1.8% -1.8%
Latin America 347 387 -10.3% +4.5% +4.5% Middle East & Africa
281 280
+0.4% +4.6% +4.6%
Total 8,969
9,332 -3.9%
+0.1% +0.8%
Europe reported growth of +1.0%. However, when changes in scope
of consolidation, exchange rates and PHS are all factored out,
growth stands at +1.3%. Growth has accelerated since the end of
June, mainly due to the ramp-up of accounts gained in the earlier
part of the year, particularly Daimler and Carrefour. This is the
broader context within which Germany returned to positive growth,
especially in the second half of the year (+10.9% in Q4), whilst
growth accelerated in France (+3.8% for the full year, after +0.7%
at June 30) and in the UK (+3.8% for the full year versus +1.8% at
June 30).
North America posted organic growth of -0.8% in 2018. When the
impact of PHS is factored out, organic growth stands at +0.5%
thanks to accounts awarded in 2017 (including McDonald’s, Diesel,
Lionsgate, Molson Coors and Southwest) and the win of Campbell's
and Marriott in early 2018, and despite pressures in the
traditional advertising. North America is impacted by the
difficulties encountered by Publicis Health Services where the
decline in Net revenue adversely affected growth by approximately
130 basis points in 2018. Given the impact of exchange rates, North
America reported a 4.7% decline in Net revenue by comparison with
2017.
Asia Pacific reported growth of -10.9% and organic growth of
-1.8%. Most of this negative performance was due to Australia
(-4.7%), which was affected in the first half-year by the
non-renewal by Qantas of its call center management contract. China
saw its growth decline slightly (-1.3%) due to the loss of certain
accounts. Singapore saw its Net revenue grow by 3.9% in 2018.
Latin America was down 10.3% mainly due to exchange rates, but
posted organic growth of +4.5%. Brazil saw its Net revenue progress
by 1.1% thanks to the gain of the Petrobras and Bradesco accounts.
The slowdown in the fourth quarter was due to the cancellation of
several campaigns by clients. Mexico continued to record sustained
growth (+5.5%).
The Middle East & Africa reported growth of 0.4% as a result
of the strengthening of the euro, but also organic growth of +4.6%
driven by the United Arab Emirates (+7.5%)
ANALYSIS OF THE KEY FIGURES
Unless otherwise specified, all figures are before IFRS 16.
Income Statement
Personnel costs totaled 5,747 million euro at December 31, 2018,
down 3.8% from 5,977 million euro in 2017. This moderate decrease
was mainly due to investments in the strategic game changers
amounting to 109 million euro, increased incentives payments as a
result of the very good performance in terms of new accounts won in
2018, and savings achieved by simplifying the Groupe’s structures.
Fixed personnel costs of 4,968 million euro represented 55.4% of
Net revenue after 56.0% in 2017. Freelance costs totaled 367
million euro in 2018, compared with 374 million in 2017.
Restructuring costs stood at 104 million euro in 2018 (down from
120 million euro in 2017) as the Groupe reorganizes around The
Power of One which increasingly integrates structures and
activities. Cost savings of 2018 reached 194 million euro. Numerous
investments (organization by country, development of production
platforms, on-going regionalization of the Shared Services Centers,
as well as various technological developments) will all help
improve operational efficiency.
Other operating costs (excluding Depreciation &
Amortization) amounted to 2,552 million euro, down from 2,603
million euro in 2017. When pass-through costs are factored out,
Other operating costs represented 17.5% of Net revenue, down from
18.1% in 2017 thanks to the initial impact of the real estate
restructuring program.
The Operating margin before depreciation & amortization was
1,652 million euro in 2018, down 0.8% from 1,666 million euro in
2017, i.e. a percentage margin of 18.4% of Net revenue (up from
17.9% in 2017).
Depreciation & Amortization for the period totaled 151
million euro, down 6.2% on 2017.
The Operating margin amounted to 1,501 million euro, down 0.3%
on the 2017 margin of 1,505 million. At constant exchange rates,
the Operating margin rose 5.0%. The operating margin rate was
16.7%, a 60-basis point increase on 2017. At constant exchange
rates and the same scope of consolidation, this increase would have
been 30 basis points. This was made possible by the decrease in
restructuring costs (10 basis points) but also by the cost savings
plans deployed over the last 18 months (210 basis points), i.e. 194
million euro. This has made way for investment totaling 109 million
in the game changers aimed at building the Groupe’s future growth
(120 basis points) and increase in incentives payments for 70 basis
points.
The operating margins by region were 16.3% for Europe, 17.3% for
North America, 17.9% for Asia Pacific, 15.0% for Latin America and
9.6% for the Middle East & Africa.
Amortization of intangibles arising from acquisitions totaled 69
million euro in 2018, down from 73 million euro in 2017. The 114
million euro real estate transformation expense was as a result of
the Groupe’s All in One real estate program commenced in early
2018. An impairment charge of 17 million euro was booked for the
period. Furthermore, a net non-recurring expense of 20 million euro
was carried in 2018 (versus a net expense of 1 million in 2017), of
which 18 million euro was the capital loss on the disposal of
Genedigi in early April 2018.
Operating income totaled 1,281 million euro in 2018, after 1,316
million euro in 2017.
Financial income (expense), which is comprised of the cost of
net debt and Other financial income and expenses, amounted to a net
expense of 16 million euro in 2018 after a net expense of 61
million euro in 2017. The cost of net debt was 22 million euro in
2018, down from 51 million euro in 2017. The improvement came from
debt reduction at Groupe level and higher interest rates in the USA
on cash in US dollars. Other financial income and expenses netted
out at an income of 6 million euro, after an expense of 10 million
euro in 2017. The change is due to the recognition of a change in
the fair value of financial assets (Fonds Commun de Placement à
Risques) in the P&L as of 2018 (IFRS9 accounting standard), for
9 million euro, when those changes were initially booked as
equity.
The revaluation of earn-out payments amounted to an expense of
13 million euro at year-end, after an expense of 66 million in
2017.
Income tax for the period was 293 million euro, corresponding to
an effective tax rate of 24.0% for 2018, after 312 million euro in
2017, i.e. an effective tax rate of 27.2 %.
The Associates’ share of profit was a loss of 4 million euro,
compared with a loss of 5 million at year-end 2017. Minority
interest totaled 11 million euro in 2018, after 10 million in
2017.
Overall, Net income attributable to the Groupe was 944 million
euro at December 31, 2018, up from 862 million euro at
December 31, 2017.
After application of IFRS 16, the
Operating margin stood at 1,523 million euro, and the percentage
operating margin was 17.0%. By region, the percentage margin was
16.4% for Europe, 17.7% for North America, 17.9% for Asia Pacific,
15.6% for Latin America, and 10,0% for the Middle East &
Africa.
Operating income amounted to 1,303 million euro in 2018.
Financial income (expense) was an expense of 71 million euro in
2018, including interest expense of 58 million euro on lease
commitments.
Income tax amounted to 285 million euro, corresponding to an
effective tax rate of 24.0% for 2018.
Overall, Net income attributable to the Groupe stood at 919
million euro at December 31, 2018.
Free Cash Flow
This indicator is used by the Groupe to measure liquidity
generated by the operating activities after investments in fixed
assets, but before acquisitions and disposals of equity interests
and before financing.
EUR million
2018 (1)after IFRS 16
2018before IFRS 16
2017before IFRS 16 Operating margin before
Depreciation & Amortization 2,049
1,652 1,666 Financial interest
paid (net) (3) (14) (38) Refunding of lease commitments and
associated interest (432) Income tax paid (328) (328) (264) Other
68 68
54
Cash Flow from operations before variations in WCR
1,354 1,378
1,418 Investments in fixed assets (net)
(196) (196)
(131)
Free Cash Flow before changes in WCR
1,158 1,182
1,287 Variation in working capital
requirements 153 129
69
Free cash-flow
1 311 1 311
1 356 (1) The financial statements at December 31,
2018 have been drawn up under IFRS 16 in anticipation of its coming
into effect (cumulative catch-up approach).
The Groupe’s free cash flow, before application of IFRS 16 and
excluding variations in working capital requirements, was down 8.2%
on the previous year to stand at 1,182 million euro. At constant
exchange rates, it fell 2.6%. This downswing was due to higher
capex and the higher level of income tax paid. Investments rose to
196 million euro from 131 million euro in 2017. This increase
includes investments made under the All in One real estate program.
Income tax paid rose from 264 million euro in 2017 to 328 million
euro in 2018, but while the first half-year 2017 saw the Groupe
receive a tax refund, the first half of 2018 was marked by the
first installment of the toll charge related to the US tax reform
(spread over eight years).
Free cash flow including variations in working capital
requirements was 1,311 million euro down 3.3% on the previous year,
but a 2.4% increase at constant exchange rates.
After IFRS 16, the Groupe’s free
cash flow before variations in working capital requirements stood
at 1,158 million euro. Free cash flow after variations in working
capital requirements was at 1,311 million euro.
Net debt
At December 31, 2018, the Groupe had net cash of 196 million
euro, compared with net debt of 727 million euro at December 31,
2017 (debt / equity ratio of 0.12), before IFRS 16. The Groupe’s
average net debt in 2018 was 1,413 million euro before IFRS 16,
down from 1,980 million euro in 2017.
After application of IFRS 16, the net cash position was 288
million euro at December 31, 2018 and the average net debt stood at
1,323 million euro.
SHARE BUYBACK PROGRAM
At the Investor Day, a 300 to 500 million euro budget for
bolt-on acquisitions was communicated with the aim to scale up the
strategic game changers. The Groupe committed to return cash to
shareholders through a share buyback program should this budget not
be reached.
Given acquisitions reached circa 200 million euro (1), it has
been decided to put in place a 400 million euro share buyback
program. This amount includes the proceeds resulting from the
disposal of Publicis Health Services for circa 100 million
euro.
HIGHLIGHTS FROM 2018
Sprint To The Future
Since 2014 and the acquisition of Sapient, Publicis Groupe has
undertaken a deep transformation and is now uniquely positioned
thanks to three key differentiators:
- Its vision: the technology provided by
Publicis.Sapient gives the Groupe the expertise to combine
marketing transformation and digital business transformation,
connected by data. Thanks to its unparalleled assets, Publicis
Groupe is able to engage with both Chief Marketing Officers (CMOs)
and Chief Information Officers (CIOs), to help clients transform
their marketing and business at scale in order to face disruptive
digital challenges.
- Its model: The Power of One gathers all
the Groupe’s capabilities under one roof, putting clients at the
core of its organization. This has led to the deployment of Global
Client Leaders (GCLs) and the implementation of the country model
under one leader and a unified executive team drawing from all the
expertise of the Groupe to break down silos and improve
efficiency.
- Its governance: the Groupe has
successfully completed its management succession and has reinforced
its decision-making committees, with strong emphasis on the
execution of strategy.
On March 20, 2018, Publicis Groupe presented its strategy and
execution plan named Sprint To The Future. This plan is based on
three pillars:
- To bring every client what it takes to
make them win in the future, namely one-to-one consumer engagement
at scale, through three strategic game changers (data, dynamic
creativity, and digital business transformation);
- A sprint to accelerate the Groupe’s
transformation, notably including the appointment of Global Client
Leaders, the roll-out of a country organization model, and an
investment program geared for growth and funded by a major cost
savings plan;
- To deliver greater value to
shareholders while transforming, through accelerated organic growth
and higher percentage margins.
Further details can be found in the Groupe’s press release dated
March 20, 2018:
https://www.publicisgroupe.com/en/news/press-releases/publicis-2020-sprint-to-the-future-en-1
The initial results are promising. Revenue generated by the
strategic game changers rose 28% in 2018, thus confirming the
relevance of the Groupe’s strategic choices. Net revenue generated
by these strategic game changers totaled circa 1,050 million euro,
representing 12% of the Groupe’s total net revenue.
At December 31, Publicis Groupe had appointed 61 Global Client
Leaders, compared with 35 at year-end 2017 and the target of 100 by
2020. The goal of having 100% of Net revenue organized under the
“country model” was reached by the end of the first half year, with
an organization articulated around eight key markets: France, UK,
DACH (Germany, Austria and Switzerland), Central and Northern
Europe, Southern Europe, North America, Latin America, Asia
Pacific, and Middle East & Africa. This organization will
accelerate the Groupe’s growth and the achievement of its
productivity gains.
The percentage operating margin rose by 60 basis points, thus
exceeding the target of expanding it by 30 to 50 bps. Headline EPS
increased by 10.3% at constant exchange rates, above the top end of
the growth range guidance of 5 to 10%.
Several acquisitions were either completed or announced in 2018
(of which Payer Sciences, Xebia, Soft Computing) with a view to
reinforcing the strategic game changers for the greater benefit of
our clients. Further acquisitions will follow over the next few
quarters.
The cost of acquisitions totaled circa 200 million euro in 2018
(1), i.e. below the budgeted range of 300 to 500 million euro. As
committed by the Groupe, part of the amount not spent will be
returned to shareholders and a 400 million euro share buyback plan
will be carried out for this purpose.
All the Groupe’s energy is focused on the execution of its
strategy with a view to delivering greater value to its clients,
people and shareholders. A dedicated incentive plan, fully aligned
with the financial objectives of the strategic plan, was
implemented in May 2018 for the group of executives entrusted with
the execution of this plan.
1 Excluding earn-outs and buy-outs, and including the announced
project to acquire Soft Computing
Acquisitions and disposals
Publicis Groupe completed the disposal of Genedigi in the second
quarter of 2018.
On July 17, Publicis Health announced the acquisition of
Payer Sciences, a highly innovative agency using marketing
strategies based on its considerable expertise in data analytics,
supporting pharmaceutical groups in their dealings with
reimbursement systems in the USA. This Morristown, New Jersey-based
firm boasts a team of 40 data analysts who are experts in
reimbursement systems and B2B communications.
On August 1, Publicis Communications announced the acquisition
of One Digital, the Sao Paulo-based digital agency focusing
on performance and creativity. One Digital was set up in 2003 but
now counts 64 professionals working with Brazilian and
international brands such as Agora (investment), American Express,
Autoline (financial services), BitBlue (cryptocurrency), Bradesco
(banking services), Next (online banking services), Norsk Hydro
Brazil (aluminum production) and ShopFacil.com (e-commerce). The
agency will be aligned with Publicis Communications which has a
headcount of 1,700 in Brazil, all agencies combined (Arc, Deepline,
DPZ&T, F/Nazca Saatchi&Saatchi, Leo Burnett, Tailor Made,
MSL, Publicis Brésil, Prodigious, Sapient AG2, Talent Marcel and
Vivid Brand).
On October 4, Publicis Groupe announced the acquisition of
Kindred Group, the largest independent digital
communications company in the Czech Republic. Kindred Group was
founded in 2013 by Michal Nýdrle and a group of partners as a
collective of independent specialized agencies that includes
digital agencies Nýdrle and Inspiro, as well as media agencies Red
Media and Go.Direct. Within five years, Kindred Group has become
the Czech Republic’s largest independent digital communications
company by revenue (source: Association of Communications Agencies
Czech Republic). Kindred Group works with a wide variety of
international and local clients including Moneta Money Bank,
Unilever, KMV, Vodafone, Zoot, Rémy Cointreau, Ceskoslovenska
obchodní (bank), Huawei and Makro Cash & Carry. With this
acquisition, Publicis Groupe will see its headcount reach the 400
mark, thus enabling it to offer end-to-end services to its clients
in the Czech Republic, spanning data analytics, technological
implementation and consulting, as well as programmatic media buying
and data-driven creativity.
On October 22, Publicis Groupe announced that it had entered
into exclusive negotiations with Xebia France, the agile IT
consultancy firm. Founded in 2005 by Luc Legardeur, Xebia France is
a renowned agile IT consultancy firm specialized in data, web and
cloud technologies, reactive software programming and mobility.
This technological gem, with a 170-strong talented team known as
the “Xebians”, works with large accounts such as Axa, Air France,
BNP Paribas, la Française des Jeux, Meetic, Natixis, Sanofi, and
start-up businesses such as BlaBlaCar, EarlyBirds and Mano Mano.
This merger will strengthen Publicis.Sapient in France (650 people)
and bolster its high-end engineering capability. It will enhance
Publicis.Sapient’s unique selling proposition which combines
strategy, consulting, experience and technology, an essential
combination for successful end-to-end transformation of its
clients.
On December 20, Publicis Groupe announced it was entering into
exclusive negotiations with the founding shareholders of Soft
Computing, a leading data marketing firm in France, with a view
to the acquisition of a controlling block representing 82.99% of
the share capital at a price of 25 euro per share (2018 coupon
attached), i.e. at a premium of 66.66% to the closing price on
December 19, 2018. Created in 1984 by Eric Fischmeister and Gilles
Venturi, Soft Computing is specialized in data and how it is
applied to enhance marketing and transform the customer experience.
With over 400 experts, this market-leading company provides its
services to the majority of large corporates in the retail,
services and financial sectors. This transaction would reinforce
Publicis Groupe’s data marketing expertise across the entire value
chain in France, further consolidating its position as the
preferred partner for its clients’ transformation. The proposed
acquisition is subject to prior information and consultation with
the bodies representing Soft Computing’s staff, as well as to the
usual conditions precedent. If the acquisition of this controlling
stake is completed, Publicis Groupe will file a simplified public
offering, which may be followed by a compulsory buyout if the
attendant conditions are met.
On December 31, 2018, Publicis Groupe signed an agreement for
the disposal of Publicis Health Services (PHS) to Altamont
Capital Partners. This disposal was closed on January 31, 2019. It
was announced in July 2018 that this business unit was placed under
strategic review by Publicis Groupe. The divestiture process was
announced in October of the same year. PHS is a contract sales and
commercialization organization. This disposal will allow Publicis
Health, led by CEO, Alexandra von Plato, to focus on creative,
media, insights, and consulting. This divestment reinforces
Publicis Groupe’s focus on providing clients with the best
healthcare-related consulting, data and technology offerings in
support of their growth and digital transformation.
Publicis Groupe is conducting a disposal process of
Proximedia. Based in France, Belgium, the Netherlands and
Spain, Proximedia helps SMEs, shopkeepers, self-employed craftsmen,
in their digital communication. This disposal project takes place
in the context of the “Sprint To The Future” plan. It will allow
Publicis Groupe to focus its the core assets, around data, dynamic
creativity and technology. This disposal project will be subject to
prior information or consultation with the bodies representing
staff, and should be closed in the first half of 2019.
NOMINATIONS
The strategic game changers in data, dynamic creativity and
business transformation are Publicis Groupe's core differentiated
assets in the marketplace. Building on their strong performance in
2018, the Groupe's focus is to accelerate their growth further in
the coming years. The development of global industry verticals in
marketing transformation and business transformation is the recipe
to scale the game changers and provide our clients with greater
expertises.
The Groupe is appointing today two key executives to deploy
those industry verticals at global level, for all of our local
operations.
Steve King, member of Publicis Groupe’s Directoire and
CEO of Publicis Media, is promoted to the role of Chief Operating
Officer of the Groupe. He will be responsible for developing the
marketing transformation industry practices in Commerce, Data,
Dynamic Creativity Optimization, Production and Investment. Steve
has a strong track-record in developing industry verticals for
Publicis Media over the recent years, and is now tasked with
building those global industry verticals consistently across all
the Groupe’s operations and countries.
Nigel Vaz is promoted CEO of Publicis.Sapient. He will be
responsible for rolling out further the Business Transformation
industry verticals in Automotive, Consumer Products, Energy &
Commodities, Retail, Financial Services, Health, Media &
Telecom, and Travel & Hospitality. He implemented these
industry verticals very successfully at the international level for
Sapient. Alan Wexler is moving to Chairman and will work directly
with Arthur Sadoun on selected key clients’ transformations.
To help these clients leverage all the Groupe’s assets, Ros
King is joining Publicis Groupe as EVP Global clients. Ros will
be tasked to strengthen the relationship with key clients of
Publicis Groupe and connect the GCL organization with the five
global marketing transformation industry verticals. Based in New
York, Ros will report directly to Arthur Sadoun who will personally
oversee the transformation of the relationship with the top
clients. Ros comes from Lloyds Banking Group where she implemented
operationally the transformation of consumer engagement as Director
of Marketing Innovation and Communications, after leading agencies
and top accounts in the industry.
OUTLOOK
We have begun 2019 with optimism even though we expect a bumpy
ride in the first quarter due to the prolonged effects in the first
months of the year of the FMCG client attrition of Q4 2018.
However, the ramp-up of the significant accounts won towards the
end of 2018 should lead to improved organic growth as of the second
quarter.
After very good performance in 2018, Net revenue from the
strategic game changers should continue to grow fast in 2019. At
the same time, we expect relatively high attrition in 2019 which
should cause higher volatility of our quarterly organic growth. We
expect 2019 organic growth to accelerate compared with 2018 and we
confirm our objective of +4.0% organic growth for the full year
2020.
We are counting on a 30 to 50-basis point increase of our
operating margin rate in 2019 and 2020. Growth of our headline
diluted EPS should be between 5 and 10% at constant exchange rates
in 2019 and in 2020.
* *
*
Disclaimer
Certain information contained in this document, other than
historical information, may constitute forward-looking statements
or unaudited financial forecasts. 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
Document 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 has applied IFRS 15 “Revenue” accounting
standard since January 1, 2018. Details of 2017 quarterly and full
year revenue before and after IFRS 15 impact, 2017 net revenue by
quarter and by geography, and the main items of 2017 half year and
full year results before and after IFRS 15 impact, have been
disclosed in a press release dated July 6, 2018.
Publicis Groupe has applied IFRS 16 “Leases” early accounting
standard, as of January 1, 2018. Publicis Groupe has retained the
“prospective method” (so called modified retrospective method by
the accounting standard) by which the cumulative effect of the
standard will be accounted for as an adjustment to the opening
equity, considering the “right of use” asset equals the amount of
the lease commitment, adjusted for rents paid in advance. The
opening balance sheet with the application of IFRS 16 as of January
1, 2018 have been disclosed in a press release dated July 6, 2018.
Besides, the 2017 consolidated income statement has not been
restated. The Group has disclosed 2018 half-year results with the
application of IFRS 16 and has provided the financial data before
taking into account this new accounting standard to allow
performance comparisons with 2017. The same has been disclosed for
2018 annual results.
Publicis Groupe has early applied IFRIC 23 ”uncertainty over
income tax treatment” since January 1, 2018, comparative data from
the previous period have been restated.
About Publicis Groupe - The Power of One
Publicis Groupe [Euronext Paris FR0000130577, CAC 40] is a
global leader in marketing, communication, and digital
transformation, driven through the alchemy of creativity and
technology. Publicis Groupe offers its clients seamless access to
its tools and expertise through modular offering. Publicis Groupe
is organized across four Solutions hubs: Publicis
Communications (Publicis Worldwide, Saatchi & Saatchi, Leo
Burnett, BBH, Marcel, Fallon, MSL, Prodigious), Publicis
Media (Starcom, Zenith, Spark Foundry, Blue 449, Performics,
Digitas), Publicis.Sapient (SapientRazorfish & Sapient
Consulting) and Publicis Health. Present in over 100
countries, Publicis Groupe employs nearly 80,000 professionals.
www.publicisgroupe.com | Twitter:@PublicisGroupe | Facebook |
LinkedIn | YouTube | Viva la Difference!
Contacts Publicis Groupe
Appendices
Net revenue (1): organic
growth calculation
(million
euro)
Q1 Q2
Q3 Q4
12 months Impact of
currencyat end December 2018(million euro)
2017 net revenue (1) 2,267 2,397
2,185 2,483 9,332 GBP (3)
(9) Currency impact (3) (217) (145) (17) 5 (374) USD (3)
(219) 2017 net revenue (1) at 2018 exchange rates (a)
2,050 2,252
2,168 2,488 8,958
Others (146) 2018 net revenue before
acquisition impact (2) (b) 2,083 2,203 2,197 2,481 8,964
Total (374) Net revenue from
acquisitions (2) (1) (5) - 11 5
2018 net revenue (1)
2,082 2,198 2,197 2,492 8,969
Organic growth (b/a) +1.6% -2.1% +1.3%
-0.3% +0.1% Organic growth ex PHS (4)
+1.9% -1.4%
+2.2% +0.5%
+0.8%
(1) Revenue less pass-through costs. See definition in
appendix (2) Acquisitions (Ardent, The Abundancy, The Herd
Agency, Ella Factory, SFR Studio, Translate Plus, Plowshare, Harbor
& Village, Optix, Independent Ideas, Domaines Publics, Payer
Sciences, One Digital, The Shed, Kindred, Xebia, IDC Creation), net
of disposals (3) EUR = USD 1.180 on average in 2018 vs. USD
1.127 on average in 2017 EUR = GBP 0.885 on average in 2018 vs. GBP
0.876 on average in 2017 (4) Publicis Groupe made effective
the disposal of Publicis Health Services in January 2019
New Business: Main wins in 2018
PUBLICIS COMMUNICATIONS
Mercedes-Benz (Global), Campbell Soup Company (USA), Ricola
(Global), Swarovski (France), Zhuyeqing Tea (China), Carrefour
(China), Luzhou Laojiao, Whitail (China), Adobe (India), Asics
(Singapore), P&O Ferries Holdings (UK), Department of Transport
and Main Roads - Queensland Government (Australia), Lapp Holding AG
(Germany), Hotwire (USA), Sentosa (APAC), ABInBev (USA), Muthoot
Pappachan Group (India), Kraft Heinz (China), Tourism Fiji
(Global), Red Bull (Brazil), Mentos & Fruittella (Brazil),
Hamburger Hochbahn AG (Germany), Tourism Ireland (UK), Brand
Factory (India), Monte Carlo Fashions (India), Betway (Global),
Atlantis Bahamas (Global), Western Union (Global), Burger King
(UK), Cathay Pacific (Global), Massage Envy (USA), The J.M. Smucker
Company (USA), Campbell’s (Global), Samsung Visual Display
(Global), Wingstop (USA), Visionworks (USA)
PUBLICIS MEDIA
7Travel (Australia), Aberdeen Asset Management (Taiwan), Abu
Dhabi DCT (UAE), Aisance (Thailand), Almara (Middle East), American
Standard (Singapore), Amplifon New Zealand (New Zealand), Avanir
(USA), Banyan Tree Group (Global), Betadine Throat Spray
(Thailand), Campbell Arnott's (Australia & NZ), Campbell's Soup
Company (North America), Che Tai International (Taiwan), Clarins
Group (France), Clas Ohlson (Norway), Didi Chuxing (China), Dubai
Corporation for Tourism & Commerce Marketing (UAE), Easy Rent
(Toyota) (Taiwan), Elizabeth Arden (China), Etisalat Misr (Egypt),
GAC Group (China), Heineken (Taiwan), Henryk Kania (Poland),
Hyderabad (HIL) Industries (India), Iberdrola (Norway), IQIYI
(Taiwan), Khumo Tyres (Australia), Laneige (Amorepacific Group)
(Taiwan), Lionsgate Entertainment (Mexico), Lucano Group (Italy),
Marriott International (Global), Marti Derm (Bonaquet) (China),
Maspex (Poland), Mcdonald's (Middle East), Metro-Goldwyn-Mayer
Studios (USA), Mondelez International (North America), Telemundo
(USA), NIIT Ltd. (India), Ola Cabs (India), Pierre Fabre (China),
Pizzardi Editore (Italy), Porter (Taiwan), Puig (Argentina), Red
Bull (USA), Shopee (Taiwan), The Body Shop (Singapore), Victorian
Electoral Commission (Australia), ZEE5 (India), Akash Institute
(India), Alfa Romeo (China), Allianz (Taiwan), Canon (Hong Kong),
Comvita (Hong Kong), Costa Coffee (UK), DTCM (UAE), Diamond
Producers Association (China), Didi (Australia), Discover Hong Kong
(Taiwan), Dunkin Donuts (USA), Ego Pharmaceuticals (Taiwan), ENI
(UAE), Football Federation Australia (Australia), Fuji Pharma
(Taiwan), Galderma (Hong Kong, India), Genentech Inc (USA), Glovo
(Italy), GOME Electrical Appliances (China), HDFC Life (India),
IKEA (Middle East), Ixigo (India), Jacobson Medical (Hong Kong),
Line Corporation (Thailand), Lion & Globe (Hong Kong), L'Oreal
(LATAM), Macy's (USA), Mcdonald's (France), Midland Realty (Hong
Kong), Universal Kids (USA), Nonno Nanni (Italy), P&O Ferries
(EMEA), PTT Exploration and Production (Thailand), Royal Carribbean
Cruises (Hong Kong), Sensee (France), Singha Estate (Thailand), SRL
Diagnostics (India), Starbucks (Singapore), TAITRA (Taiwan),
Tencent - JOOX (Hong Kong), Thai Life (Thailand), WAVO (UAE),
Welspun (India), Whitbread (UK), Driven Brands (USA), Far East Tone
(Taiwan), Lenovo (Global), Mcdonald's (LATAM), Mondelez
International (APAC), NestBank (Poland), Nestle (Singapore), Panera
(USA), Peter's Ice Cream (India), Procter & Gamble (Australia,
NZ, Russia), Spykar (India), Starbucks (Canada), Welspun (India),
Yamaha (India), Avon Products (Global), Canal Digital (Nordics),
Coca Cola (Caribbean), Daimler - Mercedes Benz (Korea), Delivery
Hero Korea (Korea), Expo 2020 (UAE), Fiat Chrysler Automobiles
(NAM), FIO banka (Czech Republic), Generali (Czech Republic),
GlaxoSmithKline (Global), Inspire Brands (Arby's) (USA), Lactalis
(Global), Luxottica Group (Global), Nestle (Malaysia &
Singapore), Organización Nacional de Ciegos Españoles (Spain),
Singapore Government (Singapore), Tesco (Slovakia), The J.M.
Smucker Company (USA)
PUBLICIS.SAPIENT
Carrefour (Global), Marriott International (Global), Mercedez
Benz (Global), Education Corporation of America (USA), Medtronic
(USA), Simon Property Group (USA), Capital Group (USA)
PUBLICIS HEALTH
Alexion Pharmaceuticals (USA), AVANIR Pharmaceuticals (USA), DBV
Technologies (USA), Eli Lilly & Co. (USA), Galderma (USA),
ParatekPharmaceuticals (USA), Pfizer Inc. (UK & USA), Roche
(USA), Astrazeneca (USA), Bayer (USA), Bristol-Myers Squibb (USA),
EyePoint Pharmaceuticals (USA), Masimo Corporation (USA), Merck
& Co. (USA), Novo Nordisk (USA), Merz Aesthetics (USA), Proctor
& Gamble (USA), Rhythm Pharmaceuticals (Europe), Sarepta
Therapeutics (USA), Allscripts (USA), Edwards LifeSciences (USA),
Endo Pharmaceuticals (USA), Gilead Sciences, Inc. (USA), Purdue
Pharmaceuticals (USA), Tris Pharma, Inc. (USA), UPMC BigData (USA),
Urovant Sciences (USA), Bausch & Lomb (USA), Boehringer
Ingelheim (USA), GlaxoSmithKline (USA), Novartis (USA), Spark
Therapeutics (USA)
2018 press releases
05-01-2018 Publicis Groupe half-year financial statement
liquidity contract 22-01-2018 Nick Law Joins Publicis as Chief
Creative Officer of Publicis Groupe and President of Publicis
Communications 23-01-2018 Carrefour group signs strategic
partnership with Publicis.Sapient to accelerate its digital
transformation 23-01-2018 Press release “Anonymous Letter”
29-01-2018 Publicis Groupe and Microsoft Announce Partnership for
Marcel AI Platform 01-02-2018 Publicis Groupe Announces Global
Leadership Promotions Across its Solutions & Regions 01-02-2018
Loris Nold appointed to the newly created role of CEO of Publicis
Groupe APAC 01-02-2018 Alexandra von Plato Appointed Chief
Executive Officer of Publicis Health 08-02-2018 Publicis Groupe :
2017 Annual Results 14-02-2018 Viva Tech 2018 14-02-2018 Leo
Burnett Chicago Names Kieran Ots EVP, Executive Creative Director
26-02-2018 Robett Hollis and FrontSide join Saatchi & Saatchi
New Zealand 28-02-2018 Saatchi & Saatchi New Zealand wins
global Tourism Fiji account 05-03-2018 Brill and Crovitz announce
launch of NewsGuard to fight fake news 20-03-2018 Publicis 2020:
Sprint To The Future 27-03-2018 Publicis Groupe Named 2018 Adobe
Experience Cloud Partner of the Year 29-03-2018 Publicis Media
launches Global Commerce capability to manage the intersection of
media and marketplaces 10-04-2018 Leo Burnett wins international
Betfair account 19-04-2018 Publicis Groupe: Q1 2018 revenue
23-04-2018 2017 Registration Document available 25-04-2018 Publicis
Groupe appoints leadership team to lead Indian market 30-04-2018
Publicis Media aligns EMEA & APAC markets under unified
leadership 24-05-2018 Publicis Groupe unveils Marcel 28-05-2018
Combined General Shareholders’ Meeting 13-06-2018 Tom Kao appointed
as Publicis Groupe Hong Kong CEO 22-06-2018 Publicis Groupe clients
champion creativity in Cannes 26-06-2018 Publicis Groupe appoints
Raja Trad to the newly created role of Chairman Middle East
03-07-2018 Publicis.Sapient boosts digital business transformation
capability with global engineering executive hires 04-07-2018
Statement 06-07-2018 Impact of application of IFRS15 and IFRS16
accounting standards 12-07-2018 Publicis Groupe Expands its Country
Model to Cover All of its Markets 17-07-2018 Lenovo Appoints
Publicis Media Bespoke Unit to Handle Global Media Strategy,
Planning and Buying 17-07-2018 Publicis Health Acquires Payer
Sciences 18-07-2018 Publicis Groupe Appoints Leader in Ukraine
18-07-2018 Publicis Groupe: First Half 2018 Results 01-08-2018
Publicis Communications acquires One Digital in Brazil 03-08-2018
Overview of the share buyback program authorized by the Combined
Ordinary and Extraordinary General shareholders’ Meeting of May 30,
2018 03-08-2018 Half-year financial report ended June 30,2018
07-08-2018 Publicis Groupe pays tribute to Joël Robuchon 08-08-2018
Publicis Groupe announces new appointments in Israel 05-09-2018
Publicis Groupe announces leadership appointments in Russia
12-09-2018 The Publicis Groupe Management Board 18-09-2018 Publicis
Media agencies named a leader and a strong performer by independent
research firm 20-09-2018 Publicis Media advances commerce practice
with regional leadership appointments 26-09-2018 Publicis Groupe
announces leadership appointments in Poland 02-10-2018 Publicis
Groupe Announces UK Country Leadership Team Headed by CEO, Annette
King 04-10-2018 Publicis Groupe Acquires Kindred Group in Czech
Republic 18-10-2018 Publicis Groupe: Third Quarter 2018 Revenue
22-10-2018 Publicis Groupe announces its plans to purchase Xebia
France 24-10-2018 Publicis Groupe appoints Jane Lin-Baden as
Managing Partner Asia Pacific 24-10-2018 Publicis Groupe Announces
Regional and Local Leadership Appointments in Nordics 25-10-2018
Maurice Lévy Recognized for his Outstanding Contribution to Peace
and Innovation 25-10-2018 VivaStories When Startuppers Connect with
Established Companies at Viva Technology 29-10-2018 Publicis Groupe
Names Leadership Team in LATAM; Expands Country Model to Mexico
31-10-2018 Diana Littman Joins Publicis Groupe as CEO, MSL US
01-11-2018 Publicis Groupe appoints Chief Strategy Officer in Japan
06-12-2018 Vittorio Bonori Appointed Publicis Groupe Italy CEO
10-12-2018 Press Release 11-12-2018 Publicis Groupe Appoints
Regional Chief Operating Officer for Northern & Central Europe
20-12-2018 Publicis Groupe announces its intention to acquire Soft
Computing
Definitions
Net revenue or Revenue less pass-through costs:
Pass-through costs mainly concern production and media activities,
as well as various expenses incumbent on clients. These items that
can be re-billed to clients do not come within the scope of
assessment of operations, net revenue is a more relevant indicator
to measure the operational performance of the Groupe’s
activities.
Organic growth: Change in net revenue excluding the
impact of acquisitions, disposals and currencies.
EBITDA: Operating margin before depreciation.
Operating margin: Revenue after personnel costs, other
operating expenses (excl. non-current income and expense) and
depreciation (excl. amortization of intangibles arising on
acquisitions).
Operating margin rate: Operating margin as a percentage
of net revenue.
Headline Group Net Income: Net income attributable to the
Groupe, after elimination of impairment charges / real estate
transformation expenses, amortization of intangibles arising on
acquisitions, the main capital gains (or losses) on disposals,
change in the fair value of financial assets, the impact of US tax
reform and the revaluation of earn-out costs.
EPS (Earnings per share): Group net income divided by
average number of shares, not diluted.
EPS, diluted (Earnings per share, diluted): Group net
income divided by average number of shares, diluted.
Headline EPS, diluted (Headline Earnings per share,
diluted): Headline group net income, divided by average number
of shares, diluted.
Capex: Net acquisitions of tangible and intangible
assets, excluding financial investments and other financial
assets.
Free Cash Flow before changes in working capital
requirements: Net cash flow from operating activities less
interests paid & received, repayment of lease liabilities &
related interests and changes in WCR linked to operating
activities
Free Cash Flow: Net cash flow from operating activities
less interests paid & received, repayment of lease liabilities
& related interests
Net Debt (or financial net debt): Sum of long and short
financial debt and associated derivatives, net of treasury and cash
equivalents.
Average net debt: Average of monthly net debt at end of
month.
Dividend pay-out: Dividend per share / Headline diluted
EPS.
Consolidated income statement
(in millions of euros)
2018 (1)
2017 (2)
Net revenue(3)
8,969 9,332 Pass-through revenue
982 914
Revenue
9,951 10,246 Personnel expenses
(5,747) (5,977) Other operating expenses
(2,155) (2,603)
Operating margin before
depreciation & amortization
2,049 1,666
Depreciation and amortization
expense(excluding intangibles arising from acquisitions)
(526) (161)
Operating
Margin 1,523
1,505 Amortization of intangibles arising from acquisitions
(69)
(73)
Impairment loss (131) (115) Non-current income and expense
(20) (1)
Operating income
1,303 1,316
Financial expenses
(81)
(101)
Financial income
70
50
Cost of net financial debt
(11) (51)
Revaluation of earn-out payments on
acquisitions
(13)
(66)
Other financial income and expenses
(60)
(10)
Pre-tax income of consolidated
companies
1,219 1,189
Income taxes
(285) (312)
Net income
of consolidated companies 934
877 Share of profit of associates
(4) (5)
Net income
930 872
Of which:- Net income attributable to
non-controlling interests
11 10
Net income
attributable to equity holders of the parent company
919 862
Data per share (in euros) - Net
income attributable
to equity holders of the parent
company
Number of shares 229,231,677 226,384,707 EARNINGS PER SHARE 4.01
3.81 Number of diluted shares 234,564,382 230,673,578
DILUTED EARNINGS PER SHARE 3.92
3.74 (1) The financial statements at December 31,
2018 were prepared with the early application of IFRS 16 (use of
the prospective method without restating the previous year) (2) In
accordance with IFRS 15 and the IFRIC 23 interpretation, applied as
of January 1, 2018, the comparative information for 2017 was
restated. (3) Net revenue: Revenue less pass-through costs.
Pass-through costs mainly concern production and media activities,
as well as various expenses incumbent on clients. These items that
can be re-billed to clients do not come within the scope of
assessment of operations, net revenue is a more relevant indicator
to measure the operational performance of the Groupe’s activities.
Consolidated statement of comprehensive income
(in millions of euros)
2018
2017
Net income for the year (A) 930
872
Comprehensive income that will not be
reclassified to income statement
- Actuarial gains (and losses) on defined benefit plans 22 13 -
Deferred taxes on comprehensive income that will not be
reclassified to income statement (2) 28
Comprehensive income that may be
reclassified to income statement
- Remeasurement of hedging instruments 6 (9) - Consolidation
translation adjustments 73
(597)
Total other comprehensive income (b)
99 (565)
Total
comprehensive income for the year (a) + (b)
1,029 307 Of which: -
Total comprehensive income attributable to non-controlling
interests 10 5 - Total comprehensive income attributable to equity
holders of the parent company 1,019
302
Consolidated balance sheet
(in millions of euros)
December 31, 2018 (1)
December 31, 2017(2)
Assets
Goodwill, net 8,751 8,450
Intangible assets, net 1,125 1,124 Right-of-use assets related to
leases 1,732 - Property, plant and equipment, net 611 590 Deferred
tax assets 150 130 Investments in associates 62 64 Other financial
assets 215 169
Non-current assets 12,646
10,527 Inventories and work-in-progress 367
385 Trade receivables 9,115 8,907 Assets on contracts 874 843 Other
current receivables and assets 689 649 Cash and cash equivalents
3,206 2,407 Assets held for sale 183
62
Current assets
14,434 13,253
Total
assets 27,080
23,780
Equity and
liabilities
Share capital 94 92 Additional paid-in capital and retained
earnings, Group share 6,759
5,864
Equity attributable to holders of the parent
company 6,853
5,956 Non-controlling interests 0
2
Total equity
6,853 5,958 Long-term borrowings
2,425 2,780 Long-term lease liabilities 1,648 - Deferred tax
liabilities 446 419 Long-term provisions 384
415
Non-current liabilities
4,903 3,614 Trade
payables 12,176 11,541 Liabilities on contracts 284 423 Short-term
borrowings 449 350 Short-term lease liabilities 393 - Income taxes
payable 365 389 Short-term provisions 125 98 Other creditors and
current liabilities 1,432 1,391 Liabilities held for sale
100 16
Current
liabilities 15,324
14,208
Total equity and liabilities
27,080 23,780 (1)
The financial statements at December 31, 2018 were prepared
with the early application of IFRS 16 (use of the prospective
method without restating the previous year) (2) In accordance with
IFRS 15 and the IFRIC 23 interpretation, applied as of January 1,
2018, the comparative information for 2017 was restated.
Consolidated statement of cash flows
(in millions of euros)
2018
2017 (2)
Cash flows from
operating activities
Net income 930 872 Neutralization of non-cash income and expenses:
Income taxes 285 312 Cost of net financial debt 11 51 (Gains)
losses on disposal of assets (before tax) 20 - Depreciation,
amortization and impairment loss 726 349 Share-based compensation
63 55 Other non-cash income and expenses 76 74 Share of profit of
associates 4 5 Dividends received from associates 2 2 Taxes paid
(328) (264) Change in working capital requirements (1)
153 69
Net cash flows
generated by (used in) operating activities (I)
1,942 1,525
Cash flows from
investing activities
Purchases of property, plant and equipment and intangible assets
(207) (136) Disposals of property, plant and equipment and
intangible assets 11 5 Purchases of investments and other financial
assets, net (11) 2 Acquisitions of subsidiaries (260) (289)
Disposals of subsidiaries 19 1
Net cash flows generated by (used
in) investing activities(II) (448)
(417)
Cash flows from
financing activities
Dividends paid to equity holders of the parent company (210) (170)
Dividends paid to non-controlling interests (10) (10) Proceeds from
borrowings 11 19 Repayment of borrowings (159) (27) Repayment of
lease liabilities (374) - Interest paid on lease liabilities (58) -
Financial interest paid (2) (69) (90) Financial interest received
(2) 66 52 Net purchases of non-controlling interests (21) (35) Net
(purchases)/sales of treasury shares and warrants
9 (291)
Net cash flows generated by
(used in) financing activities (III)
(815) (552)
Impact of exchange rate fluctuations
(IV)
133 (379)
CHANGE IN CONSOLIDATED CASH AND CASH EQUIVALENTS (I + II +
III + IV)
812 177
Cash and cash equivalents on January 1 2,407 2,228 Bank overdrafts
on January 1 (27)
(25) Net cash and cash
equivalents at beginning of year (V) 2,380 2,203
Net cash and cash equivalents at end of year 3,206 2,407 Bank
overdrafts at end of year (14)
(27) Net cash and
cash equivalents at end of year (VI)
3,192 2,380 Change in
consolidated cash and cash equivalents (VI - V)
812 177
(1)
Breakdown of change in working capital
requirements
Change in inventory and
work-in-progress 42 (17) Change in trade receivables and other
receivables (274) (693) Change in accounts payable, other payables
and provisions 385 779
Change in working capital
requirements 153 69
(2)
Financial interest has been reclassified
to Net cash flows generated by (used in) financing activities.
Consolidated statement of changes in equity
Number
ofoutstandingshares
(in millions of euros)
Sharecapital
Additionalpaid-incapital
Reservesandearningsbroughtforward
Translationreserve
Fair valuereserve
Equityattributableto
equityholders ofthe parentcompany
Non-controllinginterests
Totalequity
226,295,805 December 31, 2017
92 3,680
2,326 (337)
195 5,956
2 5,958
First-time application of IFRS 16
10
10
10
226,295,805 January
1, 2018 92
3,680 2,336
(337) 195
5,966 2
5,968 Net income 919 919 11 930 Other comprehensive income,
net of tax
74
26 100 (1)
99
Total comprehensive income for the year
919 74
26 1,019
10 1,029 4,323,480
Dividends 2 243 (455) (210) (10) (220) 210,612 Share-based
compensation, net of tax 63 63 63 Effect of acquisitions and
commitments to buy out non-controlling interests (1) (1) (2) (3)
87,984 Stock warrant exercise 0 3 3 3 322,427
(Purchases)/sales of treasury shares
13
13
13
231,240,308 December 31, 2018
94 3,926
2,875 (263)
221 6,853
- 6,853
Number
ofoutstandingshares
(in millions of euros)
Sharecapital
Additionalpaid-incapital
Reservesandearningsbroughtforward
Translationreserve
Fair valuereserve
Equityattributableto
equityholders ofthe parentcompany
Non-controllinginterests
Totalequity
225,367,784 January 1, 2017
90 3,429
2,118 255
163 6,055
10 6,065
Net income 862 862 10 872 Other comprehensive income, net of tax
(592)
32 (560) (5)
(565)
Total comprehensive income for the
year
862 (592)
32 302
5 307
3,992,216 Dividends 2 242 (414) (170) (10) (180) 383,457
Share-based compensation, net of tax 53 53 53 Effect of
acquisitions and commitments to buy out non-controlling interests 7
7 (3) 4 306,665 Stock warrant exercise 9 9
9
(3,754,317) Purchases/sales of treasury shares
(300)
(300)
(300)
226,295,805
December 31, 2017 92
3,680 2,326
(337) 195
5,956 2
5,958
Impact of IFRS16 on the opening balance sheet
(in millions of euros)
InformationDecember
31,2017 restated (1)
Initial application of
IFRS 16
InformationJanuary 1,
2018with IFRS 16
Assets
Rights-of-use assets related to leases - 1,906 1,906 Property,
plant and equipment, net 590 (43) 547 Other financial assets 169 23
192 Other non-current assets 9,768 - 9,768 Other current
receivables and current assets 649 (4) 645 Other current assets
12,604 -
12,604
Total assets
23,780 1,882
25,662
Equity and
liabilities
Total equity 5,958 10 5,968 Long-term
borrowings 2,780 (89) 2,691 Long-term lease liabilities - 1,681
1,681 Long-term provisions 415 (11) 404 Other
419 - 419
Non-current
liabilities 3,614
1,581 5,195 Short-term
lease liabilities 356 356 Short-term provisions 107 (4) 103 Other
creditors and current liabilities 1,391 (61) 1,330 Other
12,534 -
12,534
Current liabilities
14,032 291
14,323
Total equity and
liabilities 23,780
1,882 25,662 (1)
In accordance with IFRS 15 and IFRIC 23 Interpretation applied as
of January 1, 2018, comparative data from previous period have been
restated.
Impact of IFRS 16 on the consolidated balance sheet
(in millions of euros)
Information December 31,
2018published
IFRS 16 impacts
InformationDecember 31,
2018with IAS 17
InformationDecember 31,
2017restated (1)
Assets
Rights-of-use assets related to leases 1,732
(1,732) - - Property, plant and equipment, net 611 42 653 590
Deferred tax assets 150 (9) 141 130 Other financial assets 215 (19)
196 169 Other current receivables and current assets 689 19 708 649
Assets available for sale 183 (24) 159 62 Other
23,500 2 23,502
22,180
Total assets
27,080 (1,721)
25,359 23,780
Equity and
liabilities
Total equity 6,853 13 6,866
5,958 Long-term borrowings 2,425 93 2,518 2,780 Long-term
lease liabilities 1,648 (1 648) - - Long-term provisions 384 9 393
415 Other 446 -
446 419
Non-current
liabilities 4,903
(1 546) 3,357
3,614 Short-term lease liabilities 393 (393) -
- Short-term provisions 125 35 160 98 Other creditors and current
liabilities 1,432 194 1,626 1,391 Liabilities available for sale
100 (26) 74 16 Other 13,274
2 13,276 12,703
Current liabilities 15,324
(188)
15,136 14,208
Total equity and
liabilities 27,080
(1 721) 25,359
23,780 (1) In accordance with IFRS 15
and IFRIC 23 Interpretation applied as of January 1, 2018,
comparative data from previous period have been restated.
Impact of IFRS 16 on the Consolidated Income
Statement
(in millions of euros)
Information
December 31, 2018published
IFRS 16 impacts
InformationDecember 31,
2018with IAS 17
InformationDecember 31,
2017restated (1)
Revenue 9,951
- 9,951
10,246 Personnel expenses
(5,747) - (5,747)
(5,977)
Depreciation and amortization
expense(excluding intangibles from acquisitions)
(526) 375 (151) (161) Other operating expenses
(2,155) (397) (2,552)
(2,603)
Operating margin
1,523 (22)
1,501 1,505
Operating income
1,303 (22)
1,281 1,316
Cost of financial debt (11) (11) (22) (51) Revaluation of earn-out
payments on acquisitions (13) - (13) (66) Other financial income
and expenses (60) 66
6 (10)
Pre-tax income
of consolidated companies 1,219
33 1,252
1,189 Income taxes
(285) (8) (293)
(312)
Net income of consolidated companies
934 25
959 877
Share of profit of associates (4)
- (4) (5)
Net income 930
25 955
872 Of which:
- Net income attributable to minority
interests
11 -
11 10
Group net income
919 25
944 862 (1) In
accordance with IFRS 15 and IFRIC 23 Interpretation applied as of
January 1, 2018, comparative data from previous period have been
restated.
Impact of IFRS 16 on the Consolidated Statement of Cash
Flows
(in millions of euros)
Information December 31,
2018published
IFRS 16 impacts
InformationDecember 31,
2018with IAS 17 (1)
Information December 31,
2017restated (2) December 31, 2018
Cash flows from
operating activities
Net income 930 25 955 872 Neutralization of
non-cash income and expenses: Income taxes 285 8 293 312 Cost of
net financial debt 11 11 22 51 Depreciation, amortization and
impairment loss 726 (463) 263 349 Other non-cash income and
expenses 76 22 98 74 Other (239) - (239) (202) Change in working
capital requirements 153
(24) 129 69
Net cash
flows generated by (used in) operating activities (I)
1 942 (421)
1 521 1,525
Cash flows from
investing activities
Net cash flows
generated by (used in) investing activities(II)
(448) -
(448) (417)
Cash flows from
financing activities
Repayment of lease liabilities (374) 374 - - Interest paid on lease
liabilities (58) 58 - - Interest paid (69) (11) (80) (90) Others
(314) -
(314) (462)
Net cash flows generated
by (used in) financing activities (III)
(815) 421
(394) (552) Impact of
exchange rate fluctuations (IV) 133
- 133
(379)
Change in consolidated cash and cash equivalents (I + II +
III + IV)
812 -
812 177 (1)
As from January 1, 2018, interest was reclassified under
Cash flows from financing activities (2) In accordance with IFRS 15
and IFRIC 23 Interpretation applied as of January 1, 2018,
comparative data from previous period have been restated.
Earnings per share(basic and diluted)
(in millions of euros, except for share data)
2018 2017
Net income used for the calculation of
earnings per share
Group net income
A 919
862 Impact of dilutive instruments: - Savings in financial expenses
related to the conversion of debt instruments, net of tax -
- Group net income – diluted
B 919 862
Number of shares used to calculate
earnings per share
Number of shares at January 1 230,627,725 225,945,387 Shares
created over the year 2,426,498 2,529,801 Treasury shares to be
deducted (average for the year) (3,822,546)
(2,090,481) Average number of shares used for the calculation
C 229,231,677 226,384,707 Impact of dilutive instruments: -
Free shares and dilutive stock options (1) 4,815,491 3,682,435 -
Equity warrants (1) 517,214 606,436 Number of
diluted shares
D 234,564,382 230,673,578 (in euros)
Earnings per
share A/C
4.01
3.81
Diluted earnings per share (1) B/D
3.92 3.74 (1) Only
stock options and warrants with a dilutive impact, i.e. whose
strike price is lower than the average strike price, are included
in the calculation. At December 31, 2018 and 2017, all stock
options and warrants not yet exercised at the reporting date had a
dilutive impact on the current basic earnings per share.
Headline earnings per share(basic and diluted)
(in millions of euros, except for share data)
2018 2017
Net income used to calculate headline
earnings per share(1)
Group net income 919 862 Items
excluded:
- Amortization of intangibles from acquisitions, net of tax
55 55
- Impairment loss (2), net of tax
103 115
- Main capital gains and losses on disposals and change in fair
value of financial assets, net of tax
10 -
- Net effect of the tax reform in the United States
(18) (61)
- Revaluation of earn-out payments
13 66 Headline Group net income
E 1,082
1,037 Impact of dilutive instruments:
- Savings in financial expenses related to the conversion ofdebt
instruments, net of tax
- - Headline Group net income, diluted
F 1,082 1,037
Number of shares used to calculate
earnings per share Number of shares at January 1 230,627,725
225,945,387 Shares created over the year 2,426,498 2,529,801
Treasury shares to be deducted (average for the year) (3,822,546)
(2,090,481) Average number of shares used for
the calculation
C 229,231,677 226,384,707 Impact of dilutive
instruments:
- Free shares and dilutive stock options
4,815,491 3,682,435
517,214 606,436
Number of diluted
shares D 234,564,382
230,673,578 (in euros)
Headline earnings per share (1)
E/C
4.72 4.58
Headline
earnings per share – diluted (1) F/D
4.61 4.50 (1) EPS after
elimination of impairment losses, amortization of intangibles from
acquisitions, the main capital gains (losses) on disposal of
assets, the impact of the American fiscal reform and the
revaluation of earn-out payments on acquisitions. (2) At December
31, 2018, this amount corresponds to impairment losses on
rights-of-use assets related to leases of euro 114 million and
impairment losses on available for sale assets for euro 14 million.
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Peggy NahmanyCorporate Communications+ 33 (0)1 44 43 72
83peggy.nahmany@publicisgroupe.comJean-Michel BonamyInvestor
Relations+ 33 (0)1 44 43 77
88jean-michel.bonamy@publicisgroupe.comChi-Chung LoInvestor
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69chi-chung.lo@publicisgroupe.com
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