Specialist
Former senior executive at Publicis Groupe
Agenda
- Publicis Groupe’s (PAR: PUB) historic performance vs the other big three ad agencies across major regions
- Service mix evolution, M&A strategy and organisational structure
- Digital transformation, acquisition of Epsilon and Sapient, potential performance inhibitors and 2023 outlook
Questions
1.
What is your high-level overview of Publicis Groupe’s performance over the last 7-10 years? How does its business performance stack up in western Europe vs WPP, Omnicom, Interpublic, Havas and other players? What were the major wins and how did it under- or outperform vs peers?
2.
If we peg Publicis’s revenues in Europe at 100%, how much of that is from the UK, France and other markets?
3.
In which other important western Europe markets does Publicis operate in and what would those contributions look like?
4.
What about the markets with a smaller contribution, such as DACH, Spain, Italy and Portugal? Why is there lower contribution from these countries to Publicis’s overall revenue pie? Is it because these markets are inherently small or is it more related to the company’s performance vs its peers?
5.
Considering Publicis’s performance in North America during 2015-18 or up until 2020, you mentioned the company underperforming due to implementing the country model and other issues around transparency. What exactly did that entail? When I look at the revenue contribution, North America is still the largest contributor on a country basis.
6.
What’s happening in LATAM, especially given WPP’s interest to expand further in the region? How is Publicis positioned in LATAM?
7.
Publicis’s major service offerings can be segmented into creative, media, digital, identity and data management, and digital business transformation – the latter two being Epsilon and Sapient respectively. Can you help me understand Publicis’s strength in each service vertical vs its peers? Where is the company outperforming, in line or underperforming vs WPP, IPG or Omnicom?
8.
Could you elaborate on Epsilon, Sapient and the steps taken in terms of digital business transformation? You said the competitive pool has expanded to include Deloitte, Accenture and other IT consulting firms. Given this competitive expansion, how did WPP, Omnicom and others respond to Publicis’s initiatives in this division? How did Accenture, Deloitte and similar players respond to Publicis beginning to enter this space?
9.
Would you say the traditional ad agencies are still the most appropriate businesses to compare or comp against Publicis? Should we also include Accenture and other players into this mix? How should we look at expanding and comparing the business vs peers now?
10.
You mentioned Publicis’s performance is somewhat better when it comes to media in the US owing to scale factors, but this might not be the case when it comes to creative. Why is this potentially an issue for the business?
11.
Which of the industry verticals and sub-verticals can Publicis cater to best? Which industry is the company less able to cater to and how is it trying to offset any issues?
12.
I am less aware of WPP, IPG and Omnicom’s performances in health, but more familiar with Havas’s Health & You business. I understand there were some issues with that business in terms of how it was structured as a whole. How is Publicis Health stacking up to Havas Health & You or other healthcare-related ad agencies?
13.
What’s your assessment of Publicis’s business transformation over the last decade and how it overall shifted from a holding company structure to what the company has described as a connecting company model? How did the country model come into effect? What have been the major issues in implementing a country model for a company of Publicis’s scale?
14.
If working with Coca-Cola or a large-scale FMCG company, how is the P&L of those accounts structured when you have a global remit across different service functions and numerous countries?
15.
The country model was deployed for Creative, Media and Digital, but there’s another segment called Global Capabilities where Epsilon and Sapient are then placed, as you mentioned. What is the vision for how these two will have to shift? Will there be any viability to also put these into a country model or are they better off under global capabilities? What would those scale dynamics look like?
16.
What are the potential risks associated with the transition towards a connecting company, away from a holding company? It seems most of the other ad agencies still consider themselves to be holding companies, so why is Publicis making this transition?
17.
As Publicis transitions away from a holding company structure with each of the agencies and sub-agencies having their own culture, does it begin to shift towards a Publicis-only culture as it moves towards a connecting company model? How are cultural shifts and the entire transition towards a company model impacting the culture within Publicis as a whole?
18.
You mentioned Publicis becoming leaner and I believe a EUR 500m cost-base rationalisation took place in 2020. Was the substantial cost-base rationalisation due to trimming the fat or were other factors responsible for it?
19.
It seems Publicis is still going ahead with a lot of acquisitions and appears to be building out on more of the tech-related components vs acquisitions of ad agencies. What was your experience during the Epsilon integration as a whole? What were the major complexities from a post-merger integration standpoint?
20.
How is the account management team structured, particularly in managing existing clients? Is it structured on a country basis or across different segments and subsegments?
21.
Publicis has three major offerings – Creative, Media and Digital – along with the Epsilon and Sapient offerings. From an account management perspective, how are existing clients upsold into these other service offerings? How are these offerings bundled?
22.
If Sapient has a separate P&L, what is the viability of shifting that business unit away into having a country model P&L? How would that work? As you said, there’s some degree of pushback when it comes to offering on a cost-plus margin model, so what is the future or runway for this given it seems bundling would be the way to go?
23.
Does Epsilon also have its own P&L?
24.
Publicis is trying to shift away from the hold-co model, but you indicated that via acquisition of the tech capabilities, the company is, in a way, also creating another holding company structure within the business. Do you think it is now at risk of eventually being traded or valued at a holding company or a conglomerate discount and why?
25.
We’ve discussed upselling to existing clients, but what about from a new business wins perspective or attracting new clients as a whole? Are you also seeing the same amount of pushback coming in from Sapient? How are the dynamics different when it comes to new business wins?
26.
When it comes to client perception of the integrated offering, you gave a very positive example with McDonald’s. Have there been any hiccups in pitching tech capabilities, given the presence of large consulting firms such as Accenture that have really good track records? What pushback have you seen from clients when it comes to pitching these new offerings?
27.
How are strategic decision-making or corporate strategy-related initiatives structured within Publicis? Sapient and Epsilon have their own P&Ls and unique heads that are part of the business, and we also have the core Publicis divisions. How does the decision-making process work when it comes to corporate strategy initiatives around M&A and so on? How centralised or decentralised is it?
28.
Considering today’s macroeconomic environment, we are seeing a majority of verticals beginning to power down spending, to a certain degree, when it comes to advertising and the A&P [advertising and promotional] strategy. What is Publicis doing differently vs other players to attract and retain clients? Is there anything beyond the integrated offering that’s now coming into the mix?
29.
What should analysts ask of Publicis’s management to gain further clarity into the issues we have discussed, such as offsetting the industry’s cyclicality?
30.
Do you have any final points to highlight about the Publicis business?
