Publicis Groupe: Full Year 2023 Results
Another record year on all KPIs
Confident for 2024
PARIS–(BUSINESS WIRE)–Regulatory News:
Publicis Groupe (Paris:PUB):
- Full year 2023 net revenue organic growth at +6.3% with stronger than expected Q4 at +5.7%
- Industry-leading financial ratios: 18.0% operating margin rate; headline EPS up +10% at €6.96; adjusted free cash flow at €1.7bn1
- #1 rank in new business over the last 5 years2
- 2023 proposed dividend at €3.40 per share, fully paid in cash
- Confident in outperforming in 2024, despite macroeconomic challenges:
- Organic growth expected at +4% to +5%
- Operating margin rate at 18%
- Free cash flow between €1.8 and €1.9bn
FY 2023 Results
| FY 2023 | 2023 vs 2022 |
| 14,802 | +4.3% |
| 13,099 | +4.2% |
| +6.3% |
|
| 2,363 | +4.3% |
| 18.0% | – |
| 6.96 | +9.5% |
| €1.7bn1 |
Q4 2023 Revenue
| 3,540 |
| +2.3% |
| +5.7% |
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1 Free cash flow (FCF) before change in working capital requirement.
Reported 2023 FCF at €1,547M when including net cash impact for Rosetta settlement of €148M.
2 JP Morgan rankings 2019 – 2023.
Arthur Sadoun, Chairman and CEO of Publicis Groupe:
“In a very challenging macroeconomic context, and after 6 years of transformation, Publicis definitely extracted itself from the pack in 2023.
Our +6.3% net revenue organic growth for the full year, coming after a stronger than expected end to the year at +5.7% in Q4, means that not only are we substantially outperforming our holding company peers, we are also growing twice as fast as the main IT consulting firms.
What is true for organic growth is also true for our financial KPIs, be it on margin or on free cash flow.
At a moment when our clients need partners that can truly help them transform in a challenging and ever-changing environment, our unique model has made the difference, allowing us to significantly gain market share and rank first in new business for the fifth year in a row.
With a reported revenue of close to 15 billion euros in 2023, up 35% versus 2019, Publicis has firmly established itself as our industry’s second largest player and the first in terms of market capitalization.
Entering 2024, we feel confident in sustaining this momentum, just as we’ve done for the last four years with a +4.7% CAGR, twice the industry average. We anticipate delivering +4 to +5% organic growth while maintaining our historically high operating margin at 18%. When it comes to Q1, we expect to significantly outperform the industry with an organic growth within our full year guidance.
I would like to thank of our clients for their trust during this transformation journey and our people for their outstanding efforts. Thanks to all of them, we have reached new heights as a group, and are now in a position to face what will be another year of uncertainties with confidence and ambition.”
Publicis Groupe’s Supervisory Board met on February 7, 2024, under the chairmanship of Maurice Lévy, to examine the 2023 annual accounts presented by Arthur Sadoun, CEO and Chairman of the Management Board.
KEY FIGURES
| EUR million, except per-share data and percentages | FY 2023 | FY 2022 | 2023 vs 2022 | ||
| Data from the Income Statement and Cash flow Statement |
|
|
| ||
| Net revenue | 13,099 | 12,572 | +4.2% | ||
| Pass-through revenue | 1,703 | 1,624 | +4.9% | ||
| Revenue | 14,802 | 14,196 | +4.3% | ||
| EBITDA | 2,845 | 2,801 | +1.6% | ||
| % of Net revenue | +21.7% | 22.3% | – 60 bps | ||
| Operating margin | 2,363 | 2,266 | +4.3% | ||
| % of Net revenue | 18.0% | 18.0% | 0 bps | ||
| Operating income | 1,740 | 1,767 | -1.5% | ||
| Net income attributable to the Groupe | 1,312 | 1,222 | +7.4% | ||
| Earnings Per Share (EPS) | 5.23 | 4.87 | +7.4% | ||
| Headline diluted EPS1 | 6.96 | 6.35 | +9.6% | ||
| Dividend per share2 | 3.40 | 2.90 | +17.2% | ||
| Free cash flow before WC requirements | 1,547 | 1,807 |
| ||
| Underlying free cash flow before WC requirements3 | 1,802 | 1,700 |
| ||
| Data from the Balance Sheet | Dec. 31, 2023 | Dec. 31, 2022 | |||
| Total assets | 36,716 | 35,898 |
| ||
| Groupe share of Shareholders’ equity | 9,788 | 9,635 |
| ||
| Net debt (net cash) | (909) | (634) |
|
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1 Net income attributable to the Groupe, after elimination of impairment charges, real estate consolidation charge, amortization of intangibles arising on acquisitions, the main capital gains (or losses) on disposals, change in the fair value of financial assets, the revaluation of earn-out costs, divided by the average number of shares on a diluted basis.
2 To be proposed to the shareholders at the AGM of May 29, 2024.
3 Adjusted for the net impact of the Rosetta settlement for 148 million euros in 2023 and the additional 107 million euros cash tax payment made in January 2023 relating to 2022 (110 million euros at 2022 rates).
NET REVENUE IN FY 2023
Publicis Groupe’s net revenue for the full year 2023 was 13,099 million euros, up +4.2% compared to 12,572 million euros in 2022. Exchange rate variations over the period had a negative impact of 340 million euros and acquisitions (net of disposals) had a positive impact of 100 million euros.
Organic growth was +6.3% in FY 2023 versus 2022. Compared to 2019, this implied organic growth of +21%, accelerating in H2 at +22% after +19% in H1.
The Groupe’s strong and consistent performance in 2023 was reflected in each and every of its unique capabilities.
Media, one third of revenue, grew double-digit on top of double digits last year, benefitting from both market shares gains and organic growth at existing clients. Data and tech activities, another third of revenue, posted a very solid growth overall. On the one hand, despite a context of slowdown in digital business transformation experienced by comparable consulting firms, Publicis Sapient achieved a solid +3.2% organic growth on top of a very high comparable base of +19% in FY 2022. On the other hand, Epsilon’s performance accelerated in the second half of the year, posting +9.6% organically in FY 2023, supported by a sustained high demand in first-party data management. Creative, the remaining third, showed its resilience with organic growth in the low-single digits for the year.
Breakdown of FY 2023 net revenue by sector
| Segments | vs 2022 comp in % |
| Automotive | 5% |
| Financial | 0% |
| Healthcare | 14% |
| Food and beverage | 19% |
| TMT | -3% |
| Non Food consumer products | 2% |
| Retail | 7% |
| Public sector and other services | 15% |
| Leisure & travel | 11% |
| Energy & manufacturing | 14% |
Breakdown of FY 2023 net revenue by region
| EUR | Net revenue | Reported | Organic | ||||
| million | FY 2023 | FY 2022 | growth | growth | |||
| North America | 8,050 | 7,869 | +2.3% | +4.9% | |||
| Europe | 3,172 | 2,879 | +10.2% | +10.3% | |||
| Asia Pacific | 1,156 | 1,176 | -1.7% | +2.9% | |||
| Middle East & Africa | 380 | 359 | +5.8% | +12.4% | |||
| Latin America | 341 | 289 | +18.0% | +8.9% | |||
| Total | 13,099 | 12,572 | +4.2% | +6.3% | |||
In North America, net revenue was up +4.9% organically. The region grew +2.3% on a reported basis in 2023, which includes a negative impact of the U.S. dollar to euro exchange rate. The U.S. posted a very solid +5.0% organically, on top of a double-digit growth last year, fueled by Media activities at double-digit. Epsilon saw its net revenue increase by +9.6% organically on the year, with a particularly strong performance in Digital Media. Creative activities were broadly stable on the year. Finally, Publicis Sapient was up +2.5% organically on a strong comparable base, impacted by the delays in DBT projects experienced by all comparable IT consulting firms.
Net revenue in Europe grew +10.3% on an organic basis (+10.2% reported), including a very strong +10.4% in the United Kingdom, +5.2%1 in France, +7.2% in Germany and +16% in Central and Eastern Europe. Excluding the impact of our Outdoor Media activities and the Drugstore, organic growth was +9.0% in Europe.
Asia Pacific saw its net revenue grow by +2.9% organically and decline by 1.7% on a reported basis. China posted +2.2% organic growth despite difficult macroeconomic conditions throughout the year.
The Middle East and Africa region was up +12.4% organically and +5.8% on a reported basis.
In Latin America, organic growth was at +8.9%, while reported growth was at +18.0%.
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1 Excluding Outdoor Media activities & the Drugstore.
NET REVENUE IN Q4 2023
Publicis Groupe’s net revenue in Q4 2023 was 3,540 million euros compared to 3,462 million euros in Q4 2022, up +2.3%. Exchange rate variations had a 139 million euros negative impact. Acquisitions (net of disposals) had a 28 million euros positive impact.
Organic growth was +5.7% in Q4 2023, ahead of the Groupe’s upgraded guidance in October 2023.
Media, one third of revenue, accelerated to double-digit growth in Q4, supported by a solid ramp up in new business. Data & tech activities, another third, saw contrasted trends like in Q3. Epsilon, on the one hand, posted a second consecutive quarter of double-digit growth, led by the high demand for 1P data. As anticipated, Publicis Sapient saw ongoing delays in DBT projects, like all comparable IT consulting firms, leading to a slight organic decline in Q4. Creative was again resilient in Q4, with low-single digit growth.
Breakdown of Q4 2023 Net revenue by region
| EUR | Net revenue | Reported | Organic | ||||
| million | Q4 2023 | Q4 2022 | growth | growth | |||
| North America | 2,158 | 2,133 | +1.2% | +6.0% | |||
| Europe | 851 | 814 | +4.5% | +4.3% | |||
| Asia Pacific | 318 | 323 | -1.5% | +4.0% | |||
| Middle East & Africa | 106 | 104 | +1.9% | +9.7% | |||
| Latin America | 107 | 88 | +21.6% | +13.9% | |||
| Total | 3,540 | 3,462 | +2.3% | +5.7% | |||
North America net revenue was up +6.0% organically in Q4 2023. Taking into account a negative impact of the U.S. dollar to euro exchange rate, reported growth was at +1.2%. The U.S. accelerated in Q4 with +6.1% organic growth as Media grew a strong double-digit, while Creative activities were softer on the quarter, affected by localized cuts in classic advertising and on top of a high comparable base last year. Epsilon posted +10% organic on the quarter, largely driven by its Digital Media and Data divisions. In the context of delays in IT consulting projects, Publicis Sapient was broadly stable, facing a strong comparable base of +15% in Q4 2022.
Europe net revenue was up +4.3% on an organic basis (+4.5% reported). It grew +2.5% organically when excluding the contribution of Outdoor Media activities and the Drugstore. The United Kingdom posted a 4.2% organic decline on the quarter, facing a particularly high comparable base of +38% in Q4 2022 which was largely fueled by Publicis Sapient. France recorded a +6.3%1 organic growth, driven by Creative and Publicis Sapient. In Germany, organic growth was up by +5.3%. Net revenue in Central & Eastern Europe was up +20.3% organically.
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1 Excluding Outdoor Media activities & the Drugstore
Net revenue in Asia Pacific grew +4.0% organically and declined 1.5% on a reported basis. This was led by China that improved sequentially to +1.4% in Q4, thanks to a more favorable macroeconomic context. South-East Asia was double-digit again this quarter, mainly driven by India, Singapore, Thailand, and Malaysia. Australia and New Zealand posted negative performances, the latter having a very strong comparable in Q4 last year.
Net revenue in the Middle East and Africa region was up +9.7% organically (+1.9% on a reported basis), largely driven by Publicis Sapient.
In Latin America, net revenue was up +13.9% organically (+21.6% on a reported basis) led by Argentina, a strong Colombia at double digits and solid Mexico and Brazil.
ANALYSIS OF FY 2023 KEY FIGURES
Income Statement
EBITDA amounted to 2,845 million euros in 2023, compared to 2,801 million euros in 2022, up 1.6%. EBITDA was 21.7% as a percentage of net revenue.
Personnel costs totaled 8,514 million euros in 2023, up by 3.7% from 8,211 million euros in 2022. As a percentage of net revenue, the personnel expenses represented 65.0% in 2023, compared to 65.3% in 2022. Fixed personnel costs were 7,531 million euros representing 57.5% of net revenue versus 56.5% in 2022. The cost of freelancers decreased by 124 million euros in 2023, representing 332 million euros. Restructuring costs reached 111 million euros representing less than 1% of net revenue, up from 82 million euros in 2022.
Non-personnel costs amounted to 2,222 million euros in 2023, compared to 2,095 million euros in 2022. This represented 17.0% of net revenue versus 16.7% in 2022. They comprised:
- Other operating expenses (excluding pass-through costs, depreciation & amortization) amounted to 1,740 million euros, compared to 1,560 million euros in 2022. This represented 13.3% of net revenue in 2023 compared to 12.4% in 2022.
- Depreciation and amortization expense was 482 million euros in 2023, versus 535 million euros in 2022, a reduction of 10% or 53 million euros. It reflects the consolidation of our real estate footprint as well as an increase in the share of SaaS platforms used by the Groupe and directly expensed.
The operating margin amounted to 2,363 million euros, up +4.3% compared to 2022. This represents a margin rate of 18.0%, stable versus 2022.
Operating margin rates by region were 19.0% in North America, 17.7% in Europe, 19.0% in Asia-Pacific, 6.7% in Latin America and 8.7% in the Middle East and Africa region.
Amortization of intangibles arising from acquisitions totaled 268 million euro in 2023, down 19 million euros from 287 million euros in 2022. Impairment losses amounted to 153 million euros (109 million euros in 2022), essentially related to the real estate consolidation plan “All in One”, which leads to a reduction in the number of sites, while allowing better collaboration between the teams.
In addition, net non-current income is negative at 202 million euros in 2023 (versus a negative 103 million euros in 2022), largely reflecting a 203 million euros net charge related to the Rosetta settlement. A comprehensive resolution was reached with all 50 State Attorneys General, the District of Columbia, and certain U.S. territories related to past work undertaken for opioid manufacturers primarily by former advertising agency Rosetta, bringing to a close almost three years of discussions. In the context of this settlement, following the payment of 343 million dollars to the States, Publicis Health was compensated 130 million dollars by its insurers. Consequently, it has recorded a non-recurring charge of 213 million dollars before tax in the fourth quarter of 2023. In addition, 7 million dollars to be paid to the Attorney Generals for the cost of investigation and other various costs have been accounted for. The total impact of the settlement before tax in the non-current income is a charge of 220 million dollars, corresponding to 203 million euros. This settlement, in which the Attorneys General recognized Publicis Health’s ‘good faith and responsible corporate citizenship’, is in no way an admission of wrongdoing or liability.
Operating income totaled 1,740 million euros in 2023, after 1,767 million euros in 2022.
The financial result, comprising the cost of net financial debt and other financial charges and income, was a charge of 21 million euros compared to a charge of 117 million euros in 2022.
- The cost of net financial debt was an income of 78 million euros in 2023 compared to a charge of 17 million euros in 2022. It included 99 million euros of interest largely related to Epsilon’s acquisition debt (102 million euros in 2022), partly mitigated by financial income of 178 million euros, improving from 85 million euros in 2022, largely reflecting higher remuneration on cash balances.
- Other financial income and expenses were a charge of 99 million euros in 2023, notably composed by 79 million euros interest on lease liabilities and 1 million in income from the fair value remeasurement of Mutual Funds. In 2022, other financial income and expenses were a charge of 100 million euros, notably composed of 87 million euros interest on lease liabilities and 9 million in income from the fair value remeasurement of Mutual Funds.
The revaluation of earn-out payments amounted to an income of 12 million euros compared to a loss of 2 million euros in 2022.
The income tax charge was 415 million euros in 2023, corresponding to an effective tax rate of 24.1%. This compared to 431 million euros in 2022, corresponding to an effective tax rate of 24.8%.
The share in profit of associates was an income of 6 million euros (versus an income of 5 million euros in 2022).
Minority interests were a gain of 10 million euros in 2023, when they were negligible in 2022.
Overall, net income attributable to the Groupe was 1,312 million euros in 2023, an increase of 7.4% compared to 1,222 million euros in 2022.
Finally, the Groupe’s earnings per share was 5.23 euros in 2023, an increase of 7.4% compared to 4.87 euros in 2022.
Free cash flow
| EUR million | FY 2023 | FY 2022 | |
| EBITDA | 2,845 | 2,801 | |
| Financial interest paid (net) | 93 | (17) | |
| Repayment of lease liabilities and related interests | (423) | (404) | |
| Tax paid | (669) | (430) | |
| Other | (121) | 51 | |
| Cash flow from operations before change in WCR | 1,725 | 2,001 | |
| Investments in fixed assets (net) | (178) | (194) | |
| Reported free cash flow before changes in WCR | 1,547 | 1,807 | |
| TCJA transitional cash tax related to 2022 paid in January 2023 | 107 | (107) | |
| Rosetta settlement | 148 | – | |
| Underlying free cash flow before changes in WCR1 | 1,802 | 1,700 |
The reported Groupe’s free cash flow, before change in working capital requirements, was 1,547 million euros.
This included two main non-recurring cash outflows.
- TCJA, for a net impact of 107 million euros: In January 2023, the Groupe proceeded to an additional 107 million euros cash payment related to 2022 fiscal year (110 million euros at 2022 USD/EUR exchange rate), reflecting the implementation of the Tax Cuts and Jobs Act in the U.S. (TCJA) that was confirmed late December 2022. This change in tax legislation requires companies to capitalize and amortize U.S. R&D expenses over five years and has no impact on effective tax rate. Including this additional payment, the free cash flow for the Groupe was 1,700 million euros for 2022.
- Rosetta settlement, for a net impact of 148 million euros. Adjusted for this settlement, the free cash flow for the Groupe was 1,695 million euros for 2023, in line with the guidance of the Groupe of close to 1.7 billion euros.
Financial interests were an income of 93 million euros, compared to financial interest paid of 17 million euros in 2022, reflecting higher remuneration on cash balances.
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1 Adjusted for the net impact of the Rosetta settlement for 148 million euros in 2023 and the additional 107 million euros cash tax payment made in January 2023 relating to 2022 (110 million euros at 2022 rates).
Repayment of lease liabilities and related interests amounted to 423 million euros in 2023 (404 million euros in 2022). Net investments in fixed assets amounted to 178 million euros, decreasing by 16 million euros compared to 194 million euros in 2022.
Tax paid amounted to 669 million euros, compared to 430 million euros in 2022, rising by 239 million euros of which 107 million euros were due to the additional TCJA tax payment realized in January 2023 and related to 2022.
Net debt
The Groupe reported a net cash position of 909 million euros as of December 31, 2023 compared to a 634 million euros net cash position as of December 31, 2022. The Groupe’s average net debt in 2023 amounted to 432 million euros, down from 685 million euros in 2022.
GROUPE AI STRATEGY
On January 25, 2024, the Groupe announced its ambition to become the industry’s first AI-powered Intelligent System.
In a presentation hosted by Arthur Sadoun, Chairman and CEO, and Directoire+ members Carla Serrano, Chief Strategy Officer, Nigel Vaz, CEO Publicis Sapient and Dave Penski, CEO Publicis Media, the Groupe introduced CoreAI, which infuses a layer of AI across the Groupe’s platform organization to connect its enterprise knowledge under a single entity.
Held at the centre of the Groupe, CoreAI unifies and standardizes Publicis’ expansive bank of proprietary data and combines this with 35 years of business transformation data and coding owned exclusively by Publicis Sapient. CoreAI makes these assets shareable and accessible to everyone across the Groupe, empowering them across five key disciplines: Insight, Media, Creative and Production, Software and Operations.
Publicis plans to invest 300 million euros in this strategy over the next three years. In 2024, the Groupe anticipates an investment of 100 million euros with 50% dedicated to people, focused on upskilling, training and recruitment, and 50% to technology, through licenses, IT software and cloud infrastructure. This investment will be fully accounted for in the P&L. It will have no dilutive impact on the Groupe’s operating margin in 2024 as it will be funded by internal efficiencies. It will be slightly accretive on the operating margin in 2025.
The Groupe began engineering CoreAI in the second half of 2023 and plans to iteratively roll out capabilities in the first half of 2024. It will present MVPs at Viva Tech in May 2024.
ACQUISITIONS AND DISPOSALS
On January 4, 2023, Publicis announced the acquisition of Yieldify, a London-based marketing technology company. Founded in 2013, Yieldify’s leading platform and service enable companies to better personalize consumers’ website experiences, driving incremental revenue and other desired outcomes by delivering the right message at the right time based on a consumer’s profile and stage in their purchase journey. Yieldify will become part of Epsilon, and its onsite personalization, conversion optimization and customer journey offerings will complement Epsilon PeopleCloud to better address the mid-market.
On January 10, 2023, Publicis announced the acquisition of Advertise BG, one of the leading performance marketing agencies in Bulgaria. The strategic acquisition will further reinforce Publicis Groupe Bulgaria’s competencies in digital transformation, adding firepower to its existing offering across digital strategy, data, social media, and digital content creation.
On March 30, 2023, Publicis announced the acquisition of Practia, based in Buenos Aires, a leading Latin America independent technology company and provider of digital business transformation services. With its 1,200 experienced professionals, this acquisition will position Publicis Sapient to enter the Latin America market while establishing a foundation for a nearshore delivery platform that will enable the company to better service clients based in North America.
On May 23, 2023, Publicis announced the acquisition of full stake in Publicis Sapient AI Labs, an innovative artificial intelligence research and development joint venture launched in 2020 in partnership between Publicis Sapient, Elder Research and Tquila. The acquisition will further strengthen Publicis Sapient’s data & AI capabilities and enable the company to develop innovative solutions across industries for a wide range of applications, such as generative AI, natural language processing (NLP), computer vision and autonomous systems.
On June 5, 2023, Publicis announced the acquisition of Corra, based in New York, an ecommerce leader recognized by Adobe as one of the top commerce firms in North America. Corra will augment Publicis Sapient’s existing expertise in commerce solutions, including Adobe Commerce, while extending Publicis Sapient’s offerings in digital and omnichannel commerce. By acquiring Corra, Publicis Sapient will further establish itself as a global leader across the entire Adobe Product Suite, in addition to further cementing its already leading capabilities.
On June 15, 2023, Publicis and Carrefour announced the launch of their joint venture Unlimitail, to address the booming retail media market in Continental Europe, Brazil and Argentina. The launch of the company comes six months after the initiative was announced and has been unveiled during Viva Tech.
Contacts
Publicis Groupe
Amy Hadfield Corporate Communications + 33 1 44 43 70 75 [email protected]
Alessandra Girolami Investor Relations + 33 1 44 43 77 88 [email protected]
Jean-Michel Bonamy Investor Relations + 33 1 44 43 74 88 [email protected]
Lorène Fleury Investor Relations + 33 1 44 43 57 24 [email protected]
Maxine Miller Investor Relations + 33 1 44 43 74 21 [email protected]
