Arthur Sadoun: Publicis’ ‘profound transformation’ is paying off

Arthur Sadoun has said Publicis Groupe’s 2022 results and record bonus pool show that the company has undergone a “profound transformation” that is paying off.

 

The French agency group has moved from being a “communications partner” to a broader “transformation partner” for clients, with data and technology now generating one third of its revenue, the Publicis chief executive told Campaign in an interview, after reporting 10% organic revenue growth for the second year in a row and a 23% jump in operating income.

 

That allowed Publicis to pay a “record-high” bonus pool worth close to €500m and Sadoun revealed that the annual average salary increase was 8% for staff last year.

 

Publicis’ strong performance since 2021 contrasts with the run-up to the pandemic, when its organic revenues barely grew and declined in 2019 (see chart, above).

 

Sadoun, who has been CEO since June 2017, was “confident” about 2023 and played down any benefit from inflation on agency fees, saying it would add “at best 1%”.

 

Publicis share price rose more than 6% to a seven-year high of nearly €71 on the strength of the results.

 

 

Campaign: How would you rate Publicis Groupe’s performance in 2022? What were the main trends?

 

Sadoun: Despite ongoing economic challenges, 2022 was another record year for the group, with reported revenue up 20% [and 10% on an organic basis, stripping out currency differences from the strong dollar].

 

Thanks to the outstanding dedication of our teams, for the second year in a row we delivered double-digit organic growth with Q4 well ahead of expectations and industry-leading financial ratios.

 

Throughout the year, we have continued to capture the shift in our client spend towards first-party data management, digital media, commerce and business transformation, as shown by Epsilon and Publicis Sapient growing by 12% and 19% organic respectively. [Both are] uniquely positioned at the heart of our offer and had a positive impact on our media and creative activities.  

 

Publicis paid a special bonus of one week’s salary to employees who were not eligible for variable remuneration in November 2022, because the group was performing strongly and to help with the cost of living. What about annual bonuses for other staff, now that you have reached the financial year-end? Are you planning another special bonus for those who do not receive variable remuneration?

 

As we did for 2021’s results, we decided to give an extra week’s salary to everyone in the group with no variable remuneration in 2022, which went to more than 45,000 of our people, to ensure that everyone benefits from our strong performance. We paid it in advance, which was a risk, as we had no certainty on how we would end the year, but we wanted to ensure everyone got a boost over the holiday period. 

 

When it comes to annual bonuses, after paying a record-high level for 2021, we will do exactly the same for 2022 [with a bonus pool worth close to €500m], which is a challenge for our industry in an inflationary context. But it is a challenge we are able to face, thanks to our platform organisation, that puts our people first.  

 

2022 turned out better than expected, despite the Ukraine war and inflation. Does that make it harder to perform well in terms of organic revenue growth in 2023? What can you tell us about the business outlook for this year?

 

Our revenue mix, with one third in data and technology, our new-business track record and our platform organisation make us confident in delivering profitable growth in 2023. Despite the macro-economic turbulence that we are all facing, we are committing to 3% to 5% organic growth, while the market is expecting us to be flat. This is the result of the profound transformation we have gone through, which has allowed us to outperform the market over the past two years. 

 

You told Campaign last summer that you had seen a slowdown in new business after a record 2021. But one of your main competitors said in the autumn that its new-business pipeline was bigger than a year earlier. What does the pitch pipeline look like for you in 2023?

 

In 2022, we won more than our share of pitch opportunities and topped the rankings once again, for the fourth time in the past five years. H1 [from January to June] was definitely slower in terms of new business, but the pipeline picked up significantly since then, with more opportunities than risks for Publicis.  

 

A lot of digital media vendors have seen slowing revenue growth and made big job cuts recently. How much is this a worry for the wider ad industry? And why have agencies been more resilient — at least so far?

 

I won’t comment on the wider industry, but when it comes to Publicis, after growing organically by double digits for two years in a row and planning to grow between 3% and 5% next year with strong financial KPIs, we are not planning on any lay-offs.

 

Actually, we will continue to hire in fast-growing areas like data and tech and to serve our new-business wins, all while remaining cautious and ensuring we prioritise our people for any opportunities. 

 

You have been strengthening your EMEA leadership, promoting Loris Nold to regional CEO last year and recruiting WPP’s Demet Ikiler as COO in January. Is this because you are underweight in Europe, your home market, versus North America, which generates close to 60% of your revenue? And do you need a CEO for North America, rather than doing that role yourself?

 

Europe is definitely a key region for us, where we are outperforming the market, with 12.3% organic growth for the year.  It is precisely because we have such a strong dynamic and a continued ambition to transform, across the region that top talent like Demet Ikiler have decided to join Loris’ team.

 

North America is actually run collectively by an executive committee that is doing an outstanding job, with double-digit growth once again this year, leading to the best performance in the industry over the last three years. I wasn’t able to travel there as much as usual in the past year as I had to take care of my health, but they’ve demonstrated that they could do just fine without me.

 

2022 was a difficult year for you personally as you were diagnosed and treated for cancer. Now you are pushing the Working with Cancer pledge to “erase the stigma of cancer” in the workplace. What has been the response since you launched in January? What’s next? And what more would you like to see companies do? 

 

The response to Working with Cancer so far has been outstanding. We had commitments from the most influential CEOs on the planet in Davos from day one and we now have more than 100 companies that have signed the pledge and many others that are going through the process to join.

 

This is just the beginning of the journey, as it will take time to truly erase the stigma and insecurity of cancer in the workplace. The next big thing started this week, in the lead up to World Cancer Day on Saturday [4 February], with a wake-up call asking everyone to play their part in supporting cancer patients in the workplace.

 

This effort will be supported by $100m in generously donated media from our partners, with an integrated campaign across print, digital, out of hone and cinemas, featuring in Times Square and a spot during this year’s Super Bowl [on 12 February]. 

 

Alessandra Bellini, the president of the Advertising Association and chief customer officer of Tesco, one of your clients, recently warned that the UK ad industry is facing a talent shortage and identified low pay as an issue. After inflation, adspend has increased by 42% since 2011 while average annual advertising salaries have dropped 4%. How much do you recognise this picture at Publicis and what can you do about it? Are other factors such as automation and offshoring changing the dynamics of the industry?

 

Talent shortages hit just about every industry following the pandemic, and it’s one of the reasons why at Publicis we have been so invested in ensuring we attract and retain the very best talent. Our remuneration strategy has been at the heart of a major part of those efforts. In addition to what we are doing with variable remuneration, there has been an average salary increase across the group of 8% in 2022.

 

What is more, 90% of everyone who has been with us for a year or more as of January 2021 has received at least one raise since that date. Moving forward, we will continue to leverage our country model to bring the right level of response to inflation in those markets where it has hit the hardest, including in the UK.

 

Of course, salary is one part of the equation, but so is creating an employee experience that offers our teams enrichment, flexibility and purpose. So, as well as providing above market salary increases, in a post-pandemic world where talent are looking at a different relationship with work, we are also building programmes like Work Your World, Marcel Gigs and Working with Cancer to appeal to and engage with the new, emerging workforce.

 

As for offshoring and automation, they have been part of the industry for a while now. They are critical to increase efficiencies and make sure we can allocate talent and resources properly in a global economy. They are designed to support and reinforce the creative and strategic minds and diverse range of skills that sit in our agencies around the world, not replace them. 

 

(This article first appeared on CampaignLive.co.uk)