Publicis Groupe declares EUR527 million loss in 2016

Groupe

Publicis Groupe did not have a good year in 2016. The company has disclosed that it full year result for 2016 resulted in a EUR527 million net loss to the groupe.

The loss was attributed to a huge impairment the company booked in Razorfish. The groupe has henceforth merged RazorFish and SapientNitro which according to the company has now created the ‘world’s first entity dedicated to consumer experience’.

Publicis Groupe, is the world’s third largest advertising company with equity ownership in Insight Publicis Nigeria.

The positive side to the released result was its gross revenue showing the groupe managed to grow by 1.4% year on year.

However, on fourth quarter basis, the Groupe’s revenue growth fell by 2.5% on a year on year basis. The Groupe’s organic growth also declined by 2.5%.

Publicis Groupe said its gross revenue for the full year was EUR9.7 billion while its fourth quarter revenue as disclosed was EUR2,6 billion.

“Publicis Groupe’s 2016 results are confirmation – if needed – of the exceptional strength of our business model. As previously announced, all our indicators have increased: revenue, operating margin (amount and percentage of revenue), headline diluted EPS and dividend payout. On top of these positive elements, it worth mentioning the very high level of free cash flow generation and debt reduction.

These results have been achieved against the backdrop of a modest organic growth rate, mainly due to lower US revenue as a result of media accounts lost in 2015 and the first half of 2016, but also to serious issues at Razorfish. This led us to merge Razorfish and SapientNitro in order to create the world’s first entity dedicated to consumer experience, and to book an impairment charge in our 2016 accounts. After this impairment, the balance sheet now shows very solid indicators with a debt / equity ratio of 0.21 and liquidity of close to five billion euro, considerably enhancing our agility.

2016 was devoted to the implementation of Publicis Groupe’s new organization and transformation from an “advertising holding company” to a “connecting company” with the creation of a completely new approach called “The Power of One”. The results of this have been excellent since they were first felt in the summer of 2016, with remarkable client successes such as Asda in the UK, Wal-Mart in the USA, account wins including Merck, KFC and, more recently, HSBC, but also the return of Special K and the retention of Mars with a budget extension and the recent retention of GMC after a lengthy review. This new approach is still in the very early stages but, given the results already achieved, strikes me as very promising.

2017 clearly marks the beginning of a new era, as much for the market as for our Groupe. Society is evolving spectacularly as the exponential development of digital and other technologies obliges companies to undergo very deep transformation. Outcomes of referendums in the UK and Italy and elections in the US have rung in geopolitical upheavals bringing with them new uncertainties for Europe whereas America’s traditional positions seem to produce economic consequences that are difficult to gauge.

Our Groupe is ready for this new world thanks to its high-potential digital assets and capacities to help our clients embrace this new order, including help with their own transformation. And we have a new generation at the helm.

After 30 years devoted to developing the superb brand that is Publicis and making the Groupe a global player, I will be passing over the chairmanship of the Management Board to Arthur Sadoun on June 1. Arthur has demonstrated the very broad range of his abilities over the last ten years, he is a great professional driven by his passionate approach to clients and his desire to make them winners. He understands the world of tomorrow, knows how to attract talent and bring people together to work in multidisciplinary teams, which is the only way to get the best out of The Power of One which has already proved such a success. As for myself, subject to approval from the shareholders, I will succeed Elisabeth Badinter as Chair of the Supervisory Board and will have the immense pleasure of having her continued vigilant presence on the Board. At this point, I would like to express heartfelt thanks to the people who, through their input over the last three decades, have made Publicis what it is, namely the world’s third-ranked global communications group, first in digital, with operations in over 100 countries. Over the last 30 years, Publicis has multiplied its revenue by 50, its staff by 25 and its market cap by 100.

We are and will continue to be ambitious. I know that our successors are ready to step in, and they are energetic, curious, committed, creative and very determined. This new team will build Publicis Groupe’s future by achieving the ultimate goal of our transformation with The Power of One. To defy the challenges of the future, Arthur Sadoun can count on the top-flight expertise of Management Board members Jean-Michel Etienne and Anne-Gabrielle Heilbronner, enriched by the arrival of Steve King whose stellar career to date commands admiration.

To achieve our future objectives we must improve our organic growth. The first half of 2017 will still bear the marks of previous difficulties, but as of the second half year, the Groupe should be back to levels of growth which are more comparable to its peers. And beyond, growth should be sustainably back on track with performances that are more consistent with our profile and history.

Our recent commercial successes, which we should leverage to improve our margins and continue to generate substantial cash flow, give me confidence about our future. This is why we are planning to propose to the Shareholders’ AGM to approve a 16% increase of our dividend to 1.85 euro, and we are confirming our objectives for 2018.”

The Groupe also announced that it is changing its positioning from an advertising group to a ‘connection company’ through its new philosophy referred to as ‘The Power of One’.

Chairman Maurice Levy has this to say about the result: