Publicis Groupe SA
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Publicis Groupe SA
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Ladies and gentlemen, good day, and welcome to the Publicis Groupe First Quarter 2018 Revenue Presentation. For your information, this conference is being recorded.Now I'd like to hand over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead, sir. Your line is open.
[Foreign Language], and good morning to all. Thank you for joining us for the Q1 2018 revenue release. I am Arthur Sadoun, and I'm here today with Jean-Michel Bonamy, yes, Bonamy, whom you all know very well. Unfortunately, Jean-Michel Etienne, our CFO that you all know very well, too, is not with us this morning as he has caught a very contagious virus. We thought that it was not the right time to contaminate the rest of the Directoire that is in the room, so he's listening from home, but don't worry, he'll be back very soon. Jean-Michel, [Foreign Language].As I said, the 2 other member of the Directoire, Anne-Gabrielle Heilbronner, our Secretary General; and Steve King, CEO of Publicis Media, are with us in great shape and will take your question at the end of the presentation.As we already had a deep dive into the 3-year strategy and execution plan 1 month ago, today's focus will be on Q1 2018 performance and the outlook for the year. After a relatively short introduction, I will leave the floor to Jean-Michel, who will get you through the numbers.I won't read the disclaimer that you have in front of you, but please take a second to have a look as it is an important legal matter.Okay, let's begin with the highlights. Q1 has been a busy quarter. We actually had 3 key objectives: first, continue to deliver financially while we accelerate our transformation; second, demonstrate the attractiveness of our model by converting several new business opportunities into wins; and third, present our road map, Sprint To The Future, to our people, our clients, and of course, the financial community. Overall, the outcome of those 3 objectives has been positive, I would say sometimes beyond expectations, making this quarter a key milestone in our transformation journey.Let's start with our numbers. They are based on the new accounting principle. Jean-Michel will take you through in details what it means. Q1 organic growth was up 1.6% on net revenue, which we define as revenue less pass-through costs. This is a much better start than last year when Q1 was down 1.2%. We said at full year results that we will have a positive Q1 with a noticeable swing compared to Q1 2017. This is the case with 280 basis point difference compared to last year.The other good and very important news for us is North America, which was up 2.8%. It is obviously satisfying to see that the good performance of the second semester of 2017 continued in 2018 in a region where our transformation is the most advanced and where we have, as you know, more than 50% of our revenue. Europe was up 0.3%, despite a very high comparable last year at 6%. Asia Pac was negative, mainly due and maybe we will come back to that, to the discontinuation of our call center activity in Australia. However, since the beginning of February, our new organization in Asia is in place around the Power of One, and we are confident that the leadership team will leverage incredible potential at this region when we act as one. So overall, this is an encouraging start of the year in a still difficult context.Our second objective of the quarter was definitely new business. In Q1, we have had an unprecedented track record of wins in the industries with major new global accounts such as Mercedes-Benz, Carrefour, Campbell and Marriott; and also some local wins like Red Bull in the U.S. or Kraft Heinz in China. This is clearly demonstrating that our model is what our clients need to win in the future. We are the only company in the world that can connect data, content and technology at scale to deliver one-to-one consumer engagements. The attractiveness of our offer is actually pretty encouraging.The third priority in Q1 was our strategy and execution plan, Sprint To The Future, which we have presented exactly a month ago in London. It has been a lot of work done by many of us to really bring together our vision, supported by detailed actions and concrete objectives. We did it for our people to embark everyone in our transformation journey, for our clients to differentiate ourselves from the competition, and of course, for the financial community to demonstrate that our model is future-proof. The feedback we have received from all our stakeholders has been extremely positive.All in all, I would say that Q1 has been a busy but good quarter in a very challenging environment, where we still have a lot to do to deliver the kind of financial performance you definitely should expect from us. I will now leave the floor to Jean-Michel Bonamy, who will go into the detail of our Q1 performance. I will then conclude, and we will take all your question with the Directoire with the aim to finish at 11, Paris time. Jean-Michel, the floor is yours.
Thank you, Arthur. Good morning, everybody. I will follow in Jean-Michel Etienne's footsteps for this presentation. I will go through a few slides detailing our financials for the first quarter of 2018. As usual, there are more details available in the appendix at the end of this presentation deck.I will start with IFRS15 on Page 6. As you know, IFRS15 was introduced on the 1st of January 2018. Before the introduction of this accounting principle, some costs in activities such as production or out-of-pocket expenses were charged to clients and directly deducted from revenue. These costs are referred as pass-through costs, a word I'm sure you are familiar with. With IFRS15, those pass-through costs are now accounted for at the operating cost level. Therefore, revenue is higher than it was pre-IFRS15 because we no longer deduct those costs.Taking the example of Q1 2017, revenue pre-IFRS15 is EUR 2,328,000,000. Adding EUR 161 million revenue under IFRS15 is EUR 2,489,000,000. To sum up, IFRS15 leads to higher revenue, higher operating expenses because this is where we now account for the cost of those pass-through activities, but operating margin in value remains unchanged.On Page 7, you can see the Q1 2017 revenue before the impact of IFRS15, which is EUR 2,328,000,000 we reported last year. Then you can see the Q1 2017 revenue restated for IFRS15, namely EUR 2,489,000,000. And then the Q1 2018 revenue we report today under IFRS15 principle, which is EUR 2,276,000,000. For obvious reason, this revenue figure is not comparable with the one we reported last year.On Page 8, as explained, revenue has increased, but this is related to costs that are directly billable to clients and which are now included in Other operating expenses. This is why we have introduced a metric called net revenue, which is calculated as revenue less pass-through costs. In Q1 2017, those pass-through costs were EUR 222 million, made of EUR 161 million in application of IFRS15 and EUR 61 million which were already in operating expenses in application of previous accounting principles. And as this indicator excludes those pass-through costs on which we don't really have a control, this net revenue metric better reflects the level of activity of the group. Actually, it is an indicator which is very close to the previous definition of revenue pre-IFRS15 that we had in the past. Hence, the comparison of organic growth for net revenue is accurate with the organic growth comparison for the former principles.This new metric, net revenue, is what we will detail in the next pages. It is the metric we will use for our organic growth and the criteria for assessing our operating performance, both internally and externally. All the details I have gone through are obviously on this slide, but we will obviously be able to take your questions on this at the end.Turning to Page 9. Revenue was EUR 2,276,000,000. After deducting pass-through costs for EUR 194 million, net revenue was EUR 2,082,000,000, down 8.2% versus last year. Currencies had 9.6% negative impact. And as a result, at constant currencies, growth was plus 1.6%.As acquisition impact was neutral because of the contribution of acquisition being offset by disposals and the deconsolidation of Genedigi as of the 1st of January 2018, organic growth for net revenue was plus 1.6%. It showed an improvement in March compared with the growth we had at the end of February, most of it is due to phasing between actually the month of February and the month of March. So overall, Q1 performance is satisfactory.When we look at our Q1 revenue by geography on Page 10. After the last 2 quarters being negative, Europe was up 0.3% in Q1, which is satisfactory given difficult comps as Q1 '17 was up almost 6% and despite the impact of one account loss we have mentioned since Q3 '17. We will see on the next page there are mixed trends, good performance in France and the U.K., improving performance in Spain and still some pressure in Germany.As Arthur mentioned, we are really pleased to see North America continuing on the positive trend of H2 2017 with a plus 2.8% organic growth in Q1 '18. And we are still seeing the benefit from last year's account wins, including McDonald's, Southwest and Molson Coors.Asia Pacific was down 4.6% in the quarter. This is mainly the result of the discontinuation of the Qantas call center contract, as reflected in the 12% decline we posted for Australia. Albeit modest, China has returned to growth.Latin America was up 11.5%, driven by the strong growth in Brazil, the latter going up more than 10% over the first 3 months of the year, benefiting from the wins of Petrobras and Bradesco earlier in 2017.Middle East and Africa are up 4.8%, mainly due to the good performance of our operations in South Africa. Overall, Q1 organic growth for the whole group is plus 1.6%.On Page 11, we highlight the organic growth rates for the main countries for the first quarter of 2018. I will only mention a few of them. Above plus 10%, we have Brazil at plus 11%; Singapore, plus 10%; and South Africa, plus 19%. Between plus 5% and plus 10%, Mexico was plus 6%; and Russia was almost plus 10%. Between 0% and plus 5%, China was up 1%; France, plus 2%; Spain, plus 1%; the U.K. was up 1%; and the U.S. were up almost 3%. Some countries reported negative organic growth rate for the first 3 months of the year, among them Australia, I just mentioned, but also Germany and Italy.Now let's turn to net debt on Page 12. Average net debt in Q1 '18 was EUR 1,088,000,000, down 35% year-on-year. Net debt at end of March 2018 was EUR 1,771,000,000, down EUR 568 million year-on-year. As usual, due to the seasonality in changing working capital, net debt at end of March is always higher than net debt at end of December, the latter being actually the lowest point of the year. More details on our net debt can be found in the appendix.And to finish my presentation on Page 13, our liquidity was close to EUR 3.8 billion at the end of March 2018. So now Arthur will conclude, and afterwards, of course, I will be available to take your questions. And as usual, I will also be available for any follow-up questions after the call.
Thank you, Jean-Michel. [Foreign Language] Before beginning your question, I will conclude with a quick business outlook. Beyond our satisfactory numbers, the first quarter showed an unprecedent new business success for our group. This is illustrating our attractiveness. Through our plan, Sprint To The Future, we are engaging with the financial community on what we believe is a clear road map, setting a direction for our people and demonstrating our competitiveness to our clients.This is extremely important at the moment where our industry is being so challenged. Despite the attractiveness of our model and our successes in new business fronts, there are still uncertainties leading us to remain cautious. So I don't want to look too optimistic. When it comes to the annual outlook, our current performance being in terms of organic growth and new business wins make us confident to deliver our 2018 objectives, namely accelerated organic growth compared to 2017 and improvement in operating margin rates.Our next earning call will be the first half result at the end of July. It will be an occasion to share with you our strategic and operational KPI, as we discussed during the Investor Day. We want to keep you regularly informed of the progress of our transformation. We think it's extremely important.[Foreign Language], I will thank you for your attention. And now with the Directoire, we will be ready to take all of your question. Thank you very much.
[Operator Instructions] And we now move to our first question from Adrien De Saint Hilaire from Bank of America Merrill Lynch.
I just have a couple of questions, please. First of all, I know that's not a figure that you give out these days, but I'm just curious what is the amount of net new business billings in Q1? That will be the first question. And the second question is, I mean, the comparators in Q1 were the easiest of the year. But obviously, you've got all the new contracts that kick in for the rest of the year. So do you expect Q1 to be the lowest growth of the year or the highest growth of the year or in between?
Thank you very much, Adrien. On the net new business billing, we are obviously not disclosing this kind of number, but I would like to insist a bit on that, is that if you take a look at the market, if you look at the significant new business that has happened in the last year because by definition, to win in the first quarter means that it has been a long process and every brand that we just mentioned in a couple of second has been won with incredible effort by the team sometime for a year. And as you will see, it's also a side word for me to answer the second question, which is we know that those new business and those wins will have an impact on H2. We know that our good result in Q1 make us confident to deliver our numbers on a full year basis, i.e., accelerated organic growth and better margin. Now we have to take 2 things into account: first, the good news when you win a big new business and big new brands and big clients, that it is having an impact on the overall company. But by definition, it takes a bit more time because you always have a central contract and then local contract depending of the number of countries that you have won. And so by definition, it's a bit difficult to anticipate how long it will take to go through this transition. And second of all, and I hope we have been clear and at least this is why we try to do this during the Investor Day, we wanted to be as transparent as possible when it comes to Publicis, but also when it comes to our industry. And there is no doubt that our industry is today facing an attrition issue when it comes to some contract pressure on cost. And so we have to balance the wins that we have that will obviously pay in H2 in a way that needs it to be defined and the attrition coming from the industry that obviously will have a negative impact. So, so far, we are not giving more guidance about H2. Now to be very clear, this is something that we will discuss much more in detail at the end of H1.
Okay. And just one more question around...
Yes, we hear you.
One follow-up question, please, around the recent controversy around Facebook. Is that -- do you view this as good news, bad news for the media buying and planning business or your business in general?
The good news in having in the Directoire the king of media that is an expert in communication and global issue is that he can answer that, by the way, with the proper English that will change you from Jean-Michel and myself. So Steve, the floor is yours.
Okay, okay, thank you. I think the impact, I would say, is not material on our business in terms of the short or medium-term outlook in terms of the issues facing Facebook. You'll recall that when we had the very separate brand safety issues at -- particularly at YouTube, we certainly had some clients reporting their activity. We have not seen that. I'm not aware of any of our major advertisers who've paused activity on Facebook. And obviously, the issues of Facebook have been very publicly aired, including the Congress hearings last week. Facebook, I should say, is an incredibly strong organization which has had phenomenal growth. They've clearly had some issues, which have called into question their trust. We applaud the actions which they've taken regarding the privacy shortcuts, in terms of the way they're treating and respecting political, and issue ads; the way that they are now putting controls on apps, et cetera. I think the bigger issue ahead is the trust with the users, the consumers, and that is time will tell, the impact on that. We have no information yet of any data. I certainly haven't seen any in terms of the impact on Facebook users. But clearly, there is a big challenge for Facebook to reestablish that trust post Cambridge Analytica on 1 or 2 other issues. And I suspect the next few months will determine whether that trust is reestablished. I say again that Facebook is a very important partner to us and they've got incredible technology, fantastic engineering capabilities and great leadership. So we are looking for them to work very determinedly. We're in very close discussion with them to ensure that trust, if it has been damaged with users, is reestablished over the coming months. But I should say in the meantime, we don't have an issue with our major advertisers pausing or stopping advertising on Facebook as a result of the recent issues.
Yes. I mean, I want to reinforce enough what Steve said about how great company Facebook is, and by the way, a very strong partner to us. But I think there is a point that you can add to that and that, by the way, we're starting to see with our clients not only in the last weeks, but through the time, is that this clarification of the thing actually reinforce the role of agencies. And it does in 2 ways: first, it is strengthening our role as creator of content. We have been talking a lot about [indiscernible], our ability to deliver the right content with the right message at the right person at the right time is something that is owned and done by the agency. It is a core of our business, and you have never been that as important when you look at this issue of brand safety. The second thing, and we have the talk during the Investor Day, but it is legitimating our role as agents to make sure that our client own their data by building individual profile, which we all know would be the goodwill of the future. And so for those 2 reason and working hand-in-hand with Facebook, there is a shift that we think reinforce our role.
And we move on to our next question from Julien Roch from Barclays.
My first question is on pass-through revenue, focusing on the EUR 61 million, i.e., previous accounting standard, not the EUR 161 million from IFRS15. So you reported EUR 23 million of reclassification for Q1 last year, the full year results. So I wanted to know what was -- where was the extra EUR 38 million coming from by the difference between EUR 61 million and EUR 23 million. That's the first question. And then the second question, still on pass-through, is how many years did this pass-through revenue accumulate? Two questions on pass-through. Then next question is, what are the biggest accounts you are pitching for at the moment as people expect mediapalooza 2? And the last question is on GDPR. What will be the impact, going back to your Investor Day when we had the whole Oral-B demonstration using Publicis People's Cloud? You're using a lot of third-party data to develop your product. Will you still be able to do that post GDPR?
Thank you very much, Julian. I propose that we start with the 2 questions on pass-through and then we will give you the long list of new business account we are pitching at the moment, and then we move to the GDRP (sic) [ GDPR ]. Obviously, I'm joking about question number three, but we're going to move immediately to question one and two.
So regarding the EUR 61 million, so those EUR 61 million actually includes some production cost and some media cost also, which were already part of our revenue prior to the application of IFRS15. The EUR 23 million is actually included in those EUR 61 million, and they relate to the change in recognition of the revenue of some contracts, which were moving from an agent basis to a gross basis. So the remaining EUR 38 million have actually been accumulated through the growth of some of the activities that we have done on behalf of our clients, in particular in production. And this has grown over time over many years, I would say, with the activity of the company. So there is not much else to add there. It's basically revenue that we are taking out from the revenue, so it's neutral on the net revenue basis. So as those pass-through costs go down, it's because the equivalent revenue [indiscernible] level is also going down and it just cancel each other euro for the euro, hence, making the net revenue metric the appropriate one for -- to assess the performance of productivity.
Thank you, Jean-Michel. On the pipeline of new business, obviously, we can't give you the list. I would say only that, therefore, there is good activity at the moment. So it keeps us awake at night at the moment. I think they're happening, obviously, in the U.S., but not only in the U.S. And hopefully, we'll have a few other good news to announce very soon. But for the moment, here again, we can't disclose that. But there is a good activity, but we can't go into the detail. When it go to GDPR, what I would propose is that we first go through a business answer with Steve, but we will also talk about our corporate answer with Anne-Gabrielle Heilbronner in a second. But Steve, I propose you start.
Okay. Julien, maybe I'll just talk on both things as I think in both in terms of the new business. As Arthur says, we -- it's not appropriate that we name individual advertisers for they're in review, partly because we are, in many cases, not able to do so, and others, because we have NDAs with those clients. Arthur has already said in terms of media, those clients that we successfully converted in Q1, and I know you were at the -- many of you were at the Investor Day and we anticipate that there is going to be an increased level of activity in 2018 compared to 2017 in media reviews. And I certainly think that's the case. And what is, I think, gives us confidence is 1 or 2 of the advertisers that we unfortunately did not convert in 2015 during mediapalooza 1 are now coming back to us. So I think that's quite a good sign and sign of optimism. And the other is that when we look at what the clients -- the challenges the clients have, they're concerned about how they use technology, how they use creativity and how they use data in some form of connected way. And as you know, those are the 3 game changers we're focusing on as an organization. And the ability to leverage Publicis People Cloud, which we demonstrated a month ago, I think, is very good, that we took a very clear decision 2 years ago to invest in a single platform to the benefit of our clients. And that definitely being part of the engine that is leading to some of the success and gives us some optimism that we may have a strong year in terms of business development in 2018. The question about GDPR is critical, and I can say is all of our teams are very aware of the implications. You heard from Anne-Gabrielle a month ago in terms of the organization that we have behind her with dedicated teams, and I would say that every one of our clients in every one of our meetings is asking about our readiness for GDPR, and indeed, their own readiness. I don't -- I can't think of the last time I had a discussion and whether that's a client with a heavy degree of first-party data or very little first-party data entirely relying on third-party data. I think everyone is not entirely absolutely consistent in the implication to GDPR, but I know that it's a very, very strong topic, and I'm very glad that we have Anne-Gabrielle here, who can share with you the preparations that we're making.
Well, I may not reexplain again everything [indiscernible] the situation, but a bit on what Steve just said, as far as People Cloud strategy is concerned, for example, we are working as a team. We have business people assessing all the impact of GDPR for Publicis People Cloud. And so far, we feel comfortable that we meet the GDPR requirements and that does not need any further changes. What I explained the other day is that we are implementing a product development strategy to ensure privacy by design approach, which means that privacy and data protection principles are integrated into the design and development of our systems and services. So it's clearly a part of our compliance program. We are auditing our systems. We are reviewing our tools. We are working with all of our partners, clients, vendors, et cetera, and also working with all the teams trying to educate everybody. We are doing things together so that we are proactively preparing for GDPR. And in particular, we are very mindful of 2 things: one is the data, where they come from, and whether they are provided to us on a local basis. And the rules, with the controller, with the processor, where we have responsibilities. So these are the key priorities we have, and we are confident that we are moving well in that direction.
Thank you, Anne-Gabrielle. Just to add something important. Actually, we believe that GDPR is a great initiative and you actually have to know that it will be released during Viva Tech, which is the 25th of May, if I'm right. I think what is also interesting to see when you look at what's happening in the U.S. and abroad is that we want to believe that what has been initiated in Europe, we'll have [indiscernible] globally. And I will see that as a good thing.
We move on to our next question from Charles Bedouelle from Exane.
So I'm sorry because I'm going to have another GDPR-like question and I'm going to have a question on margins. So first, very quickly on margin, Jean-Michel, just wanted to check that because we are going to have lower net revenues under IFRS15, the margin target of improvement this year is actually on a pro forma basis. It's on the higher like-for-like '17 target or it's the same EBIT basically, that's my first question. And the second question is beyond GDPR, I mean, there is the e-privacy directives coming through. And one question I had really is users actually agree to have their data used because they see a utility in this through Facebook, through Google and through different services. What I'm wondering is, where is the risk for Publicis and all the intermediaries in not being able in the mid- to long term to actually have access to data or leverage data because they don't really provide the direct utility to users and they don't have a direct consent from users? So is there a risk for you here or is actually your agency role sufficient so that you just have the clients and you don't need to own or manipulate or leverage any data yourself directly? Just kind of trying to think beyond the GDPR in terms of consent and utility for users.
Well, thank you for the question. We're going to start with the margin and Jean-Michel and then I'll take the question.
Charles, as you have rightly said, as we introduced net revenue, the basis for the operating margin rate is actually lower, and therefore, the operating margin rate on a comparable basis is slightly higher in 2017 than the 15.5% we reported. And obviously, this doesn't change at all the indication we have given to increase margin by 30 to 50 basis points at the Investor Day. So the basis change, but the improvement stays the same.
Charles, thank you for the question on GDPR because, actually, it's a broader question. It's a question on the role of advertising agencies and communication group and the important data into that and how do we make sure that we are at the core of it. What we tried to explain during the Investor Day, and by the way, what we are trying to explain since a year almost now and actually in the last 4 years with the acquisition of Sapient and with the Power of One through the vision of Maurice is pretty simple now. We are shifting from being a communication group to really be a partner of our client in their transformation. And as we demonstrated, we have the capability, will it be in data, will it be in dynamic creativity or will it be in digital business transformation to actually bring one-to-one consumer engagement at scale, which is what our client wants. And the shifts we are just operating put us exactly at the center of what our client needs, and this is what, again, we have tried to demonstrate. Not saying it, but asking our clients like Samsung, like Nestlé, like L'Oréal, like P&G, to make a proper demonstration that not only we have changed and we are gaining market share, but more importantly, we are bringing them solutions to win and grow. And so to be more precise on data, which is, as you know, 1 of our 3 strategic [ agenda ] and then I will pass on to Steve that can get more into detail. Our belief is very simple, and we believe that is going to actually change the way the market is structured. Our client won't survive if they don't own their data, point number one. And so our job is to make sure that through their first-party data, they can enrich the individual profiles they've got with their consumer through second and third parties. Where we are making a big difference apart from this is that we have this platform, the Publicis People Cloud, that we have seen that actually does only one thing, which is helping our client take better marketing and business decision. And so we are capable of identifying the source of growth. We are capable, through taxonomy, to see the insights we want to use in term of communication. And then we are going to put in place the right omni-channel strategy, including media, of course, and by the way, taking the running of it to enrich our data. So to come back to your question, yes, we are an agent. We are not here to sell and buy. We are here to make sure that our client progress and grow. And to do those, what we bring out of data is better growth, better communication and better optimization of their costs. This is what we are bringing through data. Steve?
Okay, Charles. I think it's -- there's not a lot more to say there. I think on the GDPR question, as we -- on one side, you know we're implementing robust data privacy and governance, which is paramount to our business and to our clients' business. Each of our clients' needs is very different. I think what we're seeing is that our clients and partners, how they collect, use, manage and secure personal data is becoming a much more critical component of how they work. I think when you look, and fortunately, we don't think we're going to go too deeply into Publicis People Cloud because I think most of you saw a demonstration of that, the key opportunity we have is we did not build this deliberately as some black box where we are collecting and owning the data ourselves. The data, we are managing the interpretative layer for our clients to the benefits that Arthur has just articulated. Obviously, we have somewhat of a unique advantage because, as you heard earlier, that we are leveraging the capabilities across the group. We have the Sapient technology and consulting capabilities, and this has given us the 3,500 data scientists, the analysts, the engineers. We talked about the experience that we had in India in order to help us in terms of providing that interpretive layer that our clients need in order to drive growth in a low-growth environment. I think everyone could see that, that, as data becomes more critical and we build a future around our 3 game changers, the value that we have in guiding our clients, I think we can see where we've got scale and trust on our side, that we have a very strong opportunity to increase the scope of services that we provide for our clients around that interpretive layer and analysis of what we can do.
Thank you, Steve. [Foreign Language], Charles. Yes.
No, just very quick follow-up, if I may. I mean, I understand all of that and it makes perfect sense, but I guess my question was maybe slightly different is, as a consumer on Facebook -- I know I give data because I get something out of it, but as a consumer on the Internet, I don't really get anything out of Publicis, WPP or anyone that's not directed to Publicis. So my question, I suppose, is really is there a risk in the mid- to long terms, that what you guys do with data is simply not really possible anymore because consumers refuse it because they don't get any direct measurable utility, neither really clarity on what happens with the data? And so whilst everybody focuses on Facebook, the reality is Facebook provides a lot of utility to users and I'm not really quite sure the marketing industry really does. So is there -- is that a risk for you in the mid- to long term or is that actually just never going to happen and people will be able to use all kind of data the way they want and consumer will just have -- just to deal with it? I'm just trying to think about the -- more the dis-structural risk rather than Publicis-specific here.
All right, Charles. I think we could discuss this for a very long time because I don't think that there's a very clear definitive answer. I think we will probably all agree when you say consumers are aware of how their data is used and I think you've got different models, obviously. We've got many media forms, which is still entirely ad-funded. We've got others which are subscription. And I think it's -- I would suggest that the current awareness of how Facebook is funded is, as I suspect, some consumers will not be entirely aware of. And that is being publicly aired. And the way that a platform like Facebook, which we said earlier is a really important, strong partner for us and then as a huge area of growth for us and our clients, the way that they are collating data and using that data to drive revenue and Facebook has one source of revenue, one source of revenue, which is through advertising, and I suspect that, that monetary exchange and the awareness consumer has is very different than a couple of months ago. And I think in that environment, I do think that you could -- I think if you're suggesting, might this lead to a greater awareness by consumers of the value of their participating in an open, free platform? I'm sure that's correct. And you saw in the Congress hearings some of the questions and I know these have been tackled by other management at Facebook, is there a -- would there be a business option where -- which was if people were not using their data and there was the question about perhaps people would need to pay for Facebook and that's an indifferent discussion, which perhaps is a much broader question. So I do think that certainly, the implication is that, today, there is a much heightened awareness around with the 2 billion consumers who are currently using the Facebook platform of the value and the way that their data is potentially used, I would say broadly to the benefit of getting more relevant targeted ads. But the way that Facebook is driving monetization is something I suspect many of the users will have been unaware of.
I'm sorry, I wanted to take as much question as possible and make not too long answer but on this one, I'm going to have to stay 1 second because it's important also to understand our model. Data is broader, that only a few platforms. If you take a retailer, for example, when you only look at their first-party data, you have set data which is a ticket case, as we say. We have promotion, we have loyalty, we have media, we have omni-channel. A series of first-party data where you can add second and third. When we are saying -- and it is not only about words but meanings, sorry to spend a second on that, when we are saying that we are shifting from being a communication partner to a partner with information of our clients, what we are bringing to our retailer and as you have seen, we have quite a success with them at the moment, is to say, the good news results is that we are capable to bring all of those data source that are coming from different environments, Facebook being one, but just one of many and bring it together in order to build an individual profile that will help you take better marketing and business decision. You can't base our decision on your cookies. You need to make sure that you bring all of those data in the real world, in the sale, in the promotion, in the omni-channel, in the media with second and third. And where we are unique is that we have Sapient. We're doing that for a living as one of the things we are doing. So we can get into a retailer, look at their business model, explain what other first-party source of data, second and third because, obviously, we do the marketing, build it through individual profile, put the People Cloud in place and then transform marketing. And it comes back to what we are saying at the beginning of the year, which is what matters for us is, of course, to transform the marketing of our clients, to accelerate their growth and reduce their costs, but there is no way they can do that if they only rely on marketing tools. They need to go deeper in term of technology into the business model and we are capable to do both and connect it through data.
We will move on to our next question from Brian Wieser from Pivotal Research.
I'll steer away from GDPR for now, though I could also go on for a while there. First question, on your acquisition strategy, I'm just curious if you could update us on your current thoughts. I mean, I think we know why there was no addition from M&A this quarter, but just curious about any refined thoughts about the degree to which you think you'll be returning to more acquisitions in the near term. Secondarily, obviously, there's been changes at one of your major competitors. I'm curious if there's been any immediate impact in terms of the dialogues that you hear with clients to the degree that, obviously, the leader of a company can be pretty critical in helping bridge together different parts of a company when multiple parts are involved in any pitch. I'd love to hear your thoughts on that.
Thank you very much, Brian. I'm going to take the 2 questions actually. So I'll start with the acquisition strategy. As I said in introduction, we think that we have the necessary scale in data, in creativity and in technology through digital business transformation to put in place our model and actually have a successful track record in term of new business and relationship with our client as we demonstrate. So question then becomes, how can we accelerate what is still a reasonable part of our revenue and that we know is the future for our clients to win? And so our acquisition strategy is very simple. First, we want to be focused. So to be clear, we're only going to focus on what can strengthen ourselves in terms of data, dynamic creativity and technology. And I would say that the 2 major data and digital business transformation for a very simple reason is when you look at the platform we have, if you start to add bolt-on acquisition, it will accelerate the growth and the profit, leveraging the relationship we're having with our client, and more importantly, the model of the management team we have put in place. So we're going to focus on that and we're going to only focus on those 3 things. And second, we want to do it in a disciplined way. As you can have seen since Sapient, we have made -- we have been very cautious to actually be disciplined on what we are buying because here again, we had a big bet with Sapient that was definitely the right one when you look at the convergence between marketing and business transformation at the moment and how much some of our competitors on the business transformation side are ready to pay high multiple for marketing things. And so we are determined to be focused and disciplined around those 3 areas. We didn't wait for everything that has happened to have discussion on leadership with our client because you make a good very point, leadership is what matters, is how you create relationship with your clients, how do you make sure that you retain the talent. We are in the people business. And by the way, it's incredible to see the impact of a new hire. When we hired in Q1, we didn't want to mention it in the call, but when we hired in Q1, Nick Law was considered as the most progressive creative on earth that was coming from R/GA, which is a great agency by the way, where I spent 17 years and I decided to join our journey. You will have seen the impact it has in terms of image in the U.S. and over our people and our ability to attract and gain new talents [indiscernible] . We are in a people business. And so coming back to that leadership, I think that thanks to Maurice, what we have done well in the last 3 quarters is the transition of the succession. Let's be clear, we won't know before a couple of years if the succession is a success or not. But what is certain is that for the moment, while we have great transition and this is -- if I want to be provocative, I will tell you that the transition is more important than the name of the person who's going to run the company. Because 100% of our market cap lies on our clients and on our talents. And the way we are managing with Maurice and the effect of the transition is absolutely critical.
I guess, I'm just wondering if -- at one of your major competitor, WPP, of course, there's transition, and I guess, I'm just wondering, to the degree that there's now something of a vacuum, is that coming up -- and [indiscernible] , it's very recent. But has that come up in conversations at all? And is that -- does that have the potential to impact comparative environment in the next quarter or 2?
Steve, you want to take one?
Brian, disappointed you're talking about this, not about GDPR. Well, look, I've been -- in the last couple of days, I have actually been with 3 of our major clients, and sure, as you can imagine, it's definitely a point of discussion. I think you can imagine that we have a very, very full agenda. You know the challenges we have in our business. You know the game changers. The way you know we are trying to manage our business, it's usually complex. And I think what I'm saying to our clients really, we've got to make sure we don't get distracted. We've got a very, very clear road map about how we're going to build and grow and you mentioned acquisitions, for example. And if you're suggesting, have we had some sort of significant short-term impact because of what's happened at one of our competitors? The answer is obviously no. But I think the critical thing, what we're saying to our clients, I think we've got a good road map. I think we've gone through our own succession plan. Arthur has established a team, a team of people who are working together. That is why we shared that platform and those capabilities a month ago. And what I'm saying to everybody is look, whatever happens of our competitors, whether it be one of the tech companies, whether it be one of the consultancy companies or one of the other legacy holding companies, we've got a road map and we need to make sure that we become very determined around delivering to our clients every single day.
Yes. I mean, of course, we won't make any comment about WPP. But as we said in London and that Steve will recap, we are keeping eye on the ball. We are making everything we can to make our client wins because they need to find that growth. We are accelerating our transformation, and it's not an easy thing because it's about execution. And we know that in this context, it's not easy. So this is where we spend all of our time and we are committed to deliver greater shareholder values. I mean, we called our plan Sprint To The Future, sorry to make an analogy with sport, but we are on our line and we are staying on our line and we are accelerating and we are not looking behind.
We move on to our next question from Ian Whittaker from Liberum.
Three questions, please. First of all, just in terms of North America, the 2.8% organic revenue growth, I know you don't sort of split out your organic revenue growth by sort of PR, et cetera, et cetera, but given sort of North America is the heart of your media operations, would it be fair to say that media was the main driver of that 2.8% organic revenue growth in Q1 and was actually sort of ahead of that number? Second thing, just in terms of China, going back to growth, can you go through what have been the main drivers of that? Is it sort of are we looking at mainly cyclical factors? Are we looking at perhaps more spending coming through from Chinese advertisers and so forth? Because that's been a market for the agencies, has been difficult in recent quarters, that it looks as though there's maybe some secular factors involved there. Just in terms of Brazil and the strong growth that you mentioned there, is that being powered more by your firm-specific performance in terms of winning some new business wins, or is it just the general improvement in advertising trends that is coming through?
Okay, that's a lot. That's a lot, so I'm going to try to -- I'm going to start with North America. As we said, you remember maybe that we had a good H2 '17, which was important for us because as we said, this is where our model is the most advanced and having a good Q1 is obviously good news and good momentum. Let's be clear, the reason why we are winning in the U.S. is we have a very strong management team. We have incredibly strong assets. And our model is fit for what our client needs. And so to come back to your question, yes, media is doing very well, and here again, we have a very good team. But what is interesting and this is what we have demonstrated, not only in the U.S., but in the U.K., but in France, but in Germany and but in China, is that the way we go to market for any of our pitch is not coming with one expertise. It's making sure that if we really want to stand for the partner of transformation of our client, we actually use media as a fuel for growth. And so we come with a solution that is end to end, putting media at the core, adding technology and making sure that it fits for the dynamic content that should go with it. So it's -- The Power of One, that enables us very strong teams to win. And as you have noted, we had a very good track record in the U.S. for the last 18 months. And it goes from very different things like marketing transformation with HP, for example, or Campbell recently, or in term of business transformation, which we have done with McDonald's, this involves a system [ integration ], or in term of pure media, but here again in a totally integrated way with Southwest Airlines, with Lionsgate, with Marriott recently. So yes, that's a mix of that. But to conclude, I would say what make us win there is The Power of One that has been initiated 4 years ago. It is the fact that Sapient is now very well integrated, that we are working in one team focusing on delivering growth for our client. On China, as I said, we are seeing a few good wins. Campbell's was in China. Kraft Heinz is in China. We have Twitter also. The truth now -- sorry, it's in India, Twitter, sorry. But the truth there is we have a very good ability to work under one roof, and the biggest issue we're having in China is to make sure that we keep, retain and train our talents. Our ability to make sure that we can scale talent in China is key. And the reason why we are doing well, if you exclude Genedigi, is mainly thanks to that. Last but not least, on Brazil, I've been spending a lot of time in Brazil when I was the Head of Publicis Worldwide because, as you know, Brazil is a very specific market where media is included into the creative agencies. And so you have to run it a bit differently. We have been doing a huge work in Brazil to simplify our organization, get stronger and fewer agencies, and it's true that the new business pipeline we had in the last 18 months was impressive. I mean, let's be clear, it's not an easy market because there is ups and downs there. But so for the moment, we have a few agencies that are really leading the pack in a market where we make good investment. But more importantly, in the last 3 years, we really have put the right organization in place.
We will move on to our last question from Conor O'Shea from Kepler.
Just a couple of questions from me as well. Just firstly, in terms of the consumer goods sector, the 25% of your revenues, I think I understand was down about mid-single digit, 2017. Is there any change in that in the first quarter or is that headwind to the industry headwind broadly the same? Second question, on your sense of the if exchange rates remain unchanged, what could be the full year headwind to reported net sales of ForEx? And then just a very last question, just to clarify on WPP. Obviously, it's very hypothetical depending on what happens and so on, but if there are asset sales beyond potentially the market research unit, is that something that you guys might look at? Or are you very focused, as you said, on data and business transformation and not looking to consolidate some of the more traditional activities?
Okay. So if you don't mind, we're going to do two, three, one. We'll start with two, Jean-Michel?
Your question for currency, so if we assume that the exchange rates remain where they are for the remaining 9 months of the year, the impact it would have on revenue would be a bit more than EUR 500 million. So obviously, don't take it as a guidance. It's obviously an indication given the volatility in exchange rates, but that's basically where we would -- could stand today, around a bit more than EUR 500 million negative.
So on question number three, of course, we're not going to speculate on the future of WPP. What I will reiterate is, as you said, I mean, we have a plan. We have an organization. We have a clear road map in terms of KPIs. And when it comes to acquisition, we're going to focus on what is going to leverage our game-changer because we know that this is how we will win. So we are not speculating at all on what is happening at WPP and we are extremely clear. We are on our line. We know what we are looking for. And hopefully, we find the kind of assets that can help us accelerate our growth and our profits. Finally, and I will conclude with this, on consumer goods, we see a slight improvement in Q1 but we have to be very careful. I think that there is one thing that is extremely interesting there, and that should be a lesson for us as an industry, is that within the FMCG world, you have some that are doing pretty well today and sometimes very well and some that are suffering. And I think that the one that are doing pretty well are the ones that have accelerate on their transformation. And by the way, some of them are doing it with us or have decided to do it with us now and you just look at our new business track record and you see them, by the way. And so this is a massive opportunity because as I explained during the Investor Day, you are changing the addressable market. As we said, our advertising market was EUR 600 billion. But when you add EUR 100 billion in data, EUR 1 trillion in technology, which actually is only EUR 400 billion for us, you actually EUR 500 billion -- you add EUR 500 billion to our first market of EUR 600 billion, you almost double. So it create opportunity for us to be with them in their transformation. So here again, we are -- we see a slight improvement, but more importantly, we see some of them accelerating quicker than others. And we want to make sure that we are at the core of their transformation because this is how they are winning today. And coming back to the FMCG client that actually testified at the Investor Day, [ will ] be necessarily L'Oréal or P&G, you can see that our model is actually doing this. And we want to make sure on the other side that we can spread our model into more clients, so coming back to your first question, putting our execution plan in place, making sure that we accelerate on growth and make sure that we are tight on our costs and put our way to go-to-market at the disposal of more clients in the coming months.[Foreign Language] I will to thank you all for this. We did 4 minutes more than expected. Obviously, Jean-Michel Bonamy will be with you to take any question off-line starting now. I hope, Jean-Michel, you can feel better and I will see you soon. Thank you very much.
That will conclude today's conference call. Ladies and gentlemen, you may now disconnect.