Warming up for the sprint – roadshow feedback
* We hosted a CEO/CFO roadshow in Paris on 5 April
* Group in shape to meet evolving needs from clients
* Buy rating reiterated; TP maintained at EUR73
Management Focus on the strategy. Both CEO and CFO reiterated that Publicis is
well advanced compared to peers in terms of internal transformation (breaking silos,
client-centred organisation) and development of digital offers (consulting part with
Publicis.Sapient, data management, digital creativity) which makes it a unique player
in the marketing landscape. It is even more important at a time when clients are
looking for strategic partners instrumental to their marketing and business
transformation. Management did not elude the obvious difficulties relating to the
market itself as several clients are already anticipating a likely slowdown of the macro
growth, and competitors are offering massive discounts to retain budgets. Publicis is
also facing challenges in-house with its internal transformation and especially the
addition of scarce talents. Financial communication should focus in the future on facts,
based with KPIs, in order to restore confidence. The ultimate aim is to shape Publicis
to meet clients’ future demand, to reinvent a cash-generative sustainable growth
model with stable margins. Value for the shareholders was mentioned very often.
Our take: Buy reiterated. This roadshow supports our positive view on the name we
expressed post CMD. We see the outcome of the roadshow as broadly consistent
with the strategy, outlining the room for manoeuvre Publicis has in terms of cost
management, and highlighting its differentiation versus peers. A weak Q1
(HSBCe organic around 0%) does not prevail on the FY performance that will see an
increasing contribution from new businesses quarter after quarter. Even if Publicis is
not immune to headwinds impacting the industry, and considering the journey will
likely remain bumpy, we are positive on the long-term strategy and consider the
current valuation as favourable (PE 2018e 12.8x vs 13.5x for agencies, vs 22.6x for
Accenture). Our EPS 2018-20e estimates change marginally (<1%, mostly driven by
FX); reiterate Buy rating and EUR73 target price.