Publicis Groupe’s Q1 earnings report on Thursday (April 20) catapulted it to the No. 2 largest holding company by revenue and the No. 1 by market cap.
The company posted 7.1% organic growth and 10% net revenue growth in the quarter, solidifying its position over Omnicom after many years of being the third largest in its competitive set.
According to CEO Arthur Sadoun, Publicis has grown 45% since 2019 — a sign that its transformation, underpinned by the major acquisitions of Sapient (2014) and Epsilon (2019), is paying off. The former grew by 11% year over year while the latter grew by 10%.
“It’s true that we are continuing to capture the shift in spend toward data, digital media, commerce and digital business transformation with Sapient and Epsilon, which are again [growing] double digits and of course accretive to our growth,” he said. “So this is our booster.”
Strong performance has led Publicis to reiterate its guidance of 3% to 5% growth for the year, targeting the higher end of the range.
Sadoun sat down with Campaign US to discuss the results, as well as his outlook on the economy, his view on talent and address recent changes to its UK leadership team after CEO Annette King’s departure.
How would you evaluate performance this quarter? What services within the group do you see as growth drivers vs. tailwinds?
After two years of double-digit growth, we are experiencing a very strong start to the year. Q1 2023 is ahead of expectations, with net revenue up 10% and organic growth at 7.1%.
In an industry that continues to change dramatically, we were again well-positioned this quarter to meet the rising needs of clients toward first-party data management, digital media and commerce, with Publicis Sapient and Epsilon both growing double-digits.
It’s important to note that this also positively impacted our creative and media operations, which grew in the high singles organically. All our regions performed well, with no tailwinds — even in China, where we posted very solid numbers despite the difficult health situation in the country in the early months of the year.
What’s your outlook on the economy? Are clients spending, and if so, in what sectors? Where is there a pull back, if anywhere? What are your contingency plans if the economy takes a turn for the worse in the second half of the year?
There is no doubt that the current macroeconomic environment is increasingly challenging with recent tensions in the banking system adding to the ongoing war in Ukraine, high inflation and interest rates. So, on one hand, we should be cautious as some cuts in marketing budgets are local and sometimes longer decision processes for big investments could occur over the course of the year. But, on the other hand, we believe that our clients will continue investing in their transformation to navigate — through data, creativity and technology — an increasingly complex marketing landscape where they need to improve their ROI.
When it comes to Publicis, the strength of our model, our revenue mix and our go-to-market that directly address these needs make us confident in delivering the guidance we have set at the beginning of the year. Actually, despite an increasing level of uncertainty, we are now even planning to be in the top half of our organic growth objective. To be clear, our contingency plan is our unique model and our talent.
What does Publicis’ new business pipeline look like? How are you assessing opportunities as large clients consolidate with holding companies? How does organic growth play into your new business strategy?
Thanks to our unique ability to connect data, creativity, media and technology at scale to transform our clients’ marketing model, we topped the new business charts four times in the last five years. We are again seeing a good start to the year with some significant wins in media, creative and production. New business is definitely contributing to organic growth but more importantly, it is the ultimate way to demonstrate the superiority of our model versus competition.
Last quarter you told Campaign that Publicis is benefiting from its transformation. Do you view that transformation as complete? If not, how do you see Publicis evolving over the next few years?
Our transformation is complete.
We made the two biggest acquisitions in our industry with Epsilon and Publicis Sapient to lead in data and technology. We put in place the country model to integrate those capabilities with our media and creative operations. We launched our AI-based platform Marcel way before everyone was starting to talk about AI, to make sure that everyone at Publicis could share more, learn more and progress faster.
These were big bets, hard work and a challenging journey, as change is never easy. But it paid off. In 2022, we delivered the best financial ratios, reached the No. 1 position in terms of market capitalization and have moved from third to second place in terms of size. Of course, we still have a lot to do in a period that is particularly more challenging and where they will need our help to transform even faster. We will continue to invest both in retaining and attracting the best talent in our industry and in new technologies that can further enhance our data and tech existing capabilities.
John Wren recently announced a new plan for Omnicom staff to return to the office three days per week. Have you thought about this at all? What is Publicis' approach and how does it apply to different markets?
We have been thinking about returning to the office every day since people left to work from home in 2020. On one side, we have all enjoyed the benefits of working remotely and it is now part of our model. Marcel has been a huge enabler to make sure people continue to connect, learn and grow while working from home. It has given us the opportunity to have experiences like Work Your World, where every employee can spend six weeks in any country where Publicis is located around the world.
On the other hand, we must never forget that culture is built when we are together in the same place, that working physically with each other is the best way to truly progress individually and create collectively. So, we have developed a hybrid model that varies across geographies and expertise to progressively bring people back to the office until they reach the right balance between remote and in-person.
Publicis recently said that it will not replace UK CEO Annette King as she moves to another job at Accenture Song. Is this a sign that Publicis is moving away from the country model?
First, I want to thank Annette for her tenure at Publicis. Due to Accenture Song’s talent leakage pressures that day, the press about Annette joining Accenture was released even before her formal resignation. This was definitely a first for me but nonetheless, we wish her all the best in her new journey.
When it comes to the UK, we are of course incredibly committed to the country model. We have today a very strong UK Comex with strong CEOs incarnating our different brands and running together a single-country P&L under the supervision of Loris Nold, CEO of Europe. The UK is also the place where some of our key global leaders sit, starting with Nigel Vaz leading Publicis Sapient or Magnus Djaba who’s taking care of our global clients but is also in charge of our relationship with BT in the country, not to mention Chaka [Sobhani] the global CCO of Leo Burnett who is Campaign’s Creative Leader of the Year, along with Leo Burnett as Agency of the Year.
You’ve helped your employees manage inflation with higher raises, off-cycle bonuses, etc. What are your plans to continue to meet these expectations and support employees during tough times? Do you believe ad industry talent is underpaid and are you trying to compensate for that?
At Publicis, we have always had a people-first strategy. During the pandemic, our priority was to save as many jobs as possible, which we achieved through our platform organization. Since inflation hit, we have shown the same level of commitment, raising everyone’s salary by 8% on average. We have given two additional weeks of salary to roughly 45 000 people without variable remuneration, which translates to a 4% additional increase. We have raised our bonus pool, which was already at a historical high in 2021, by 20% in 2022, while the rest of the industry was reducing them.
It is a fact that a large number of people are truly being impacted by inflation, mainly when it comes to food and energy, and it is our role to help them and their families in these challenging times. Even more so when we are outperforming the industry as was the case in previous years. Because when our business wins, everyone should win.
Last year you opened up about your experience with cancer, inspiring Publicis to launch the Working with Cancer pledge. How has the experience changed your views as a leader and on how the company can support those experiencing illness?
Making my cancer public was challenging both personally and professionally as it meant showing vulnerability in what is definitely a very competitive environment. But it opened my eyes to the stigma that cancer represents in the workplace.
When I made my cancer public, I received so many testimonials of people hiding their cancer because they were scared for their job that I felt a sense of urgency to act. A year later, I am incredibly grateful to all the creative minds at Publicis that contributed to the Working with Cancer initiative and all the clients who have supported it. Over 500 companies including the most iconic brands and key leaders in our industry have signed the pledge to build a more open, supportive and recovery-forward culture at work for all employees with cancer. Our program has reached over 2 billion people, and this is only the beginning.