Publicis Groupe SA
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Publicis Groupe SA
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Good day, and welcome to the Publicis Groupe Third Quarter 2018 Revenue Conference Call. Today's conference is being recorded. At this time, I would like the turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead, sir.
Thank you, Gianna. [Foreign Language] and welcome to Publicis Groupe Third Quarter 2018 Revenue Call. I'm Arthur Sadoun, and I'm here in Paris with our CFO, Jean-Michel Etienne. The 2 other member of the [ Management Board ] are also with us. Our Secretary General, Anne-Gabrielle Heilbronner, is in the room. And Steve King, CEO of Publicis Media, is on the phone. As usual, we will take your questions together after the presentation. Jean-Michel Bonamy is also here and will take your question offline after this session. In a nutshell, Q3 has been a solid quarter. We are on track with our internal forecast on organic growth. We are seeing our new business momentum growing with again an impressive track record. And we are accelerating our transformation, taking fast and clear decision on our perimeter, a good example of that being the divestment of PHS. But we recognize the environment is challenging, and we still have a lot to do. We are committed to take the necessary step to execute our plan and deliver shareholder values. During this call, as always, we will do 3 things: first, I will give you an overview of the Q3 revenue and highlights; second, Jean-Michel will provide the details of our performance; and finally, I will conclude with the outlook. We will then take your question. This should take us to 11:00 a.m. Paris time. Hopefully, we get to do them in 1 hour. Now let's dive into the presentation. Please have a look at the disclaimer on Page 2 as it is an important legal matter. Okay. Let's begin with the highlight of Q3, starting with our organic growth, which reflects our decision, explained during H1, to classify Publicis Health Services, also referred as PHS, as a noncore activities. To remind you, this is an outsourcing activity of sales representative, mainly in the U.S., that none of our direct or indirect competitor has exposure to. As we committed in H1, and I guess you will remember, we have followed a review on those business -- on this business over the summer. And very quickly actually, we decided to launch the disposal process that is well advanced. This is why our discussion today will focus on the number of Publicis Groupe excluding PHS. This is the best way to measure the performance of our group core operation. It is, by the way, also worth noting that PHS, while profitable, has a dilutive effect on our margin. Of course, as we want to be fully transparent, Jean-Michel will provide the performance and contribution of PHS in Q3. So what are the highlights for Q3? Our organic growth for the third quarter was plus 2.2%. After a good Q1 and the bump experience in Q2, we are coming back to growth in Q3 as expected. We are benefiting from the first effects of our major new business win as early as 2018, representing contribution of roughly 100 basis points and, of course, the continued growth acceleration of our game changer, namely, our capabilities in data, dynamic creativity and digital business transformation. As a consequence, all our geographies reported positive organic growth in Q3, with North America at plus 1%, Europe at plus 4.2%, APAC at plus 2.5% and LatAm at 4.8%. Let me highlight how our model is driving results in key markets such as France and the U.K., which both posted very encouraging organic growth at plus 6% and plus 10%, respectively. In the U.S., there is one particular challenge and one positive indicator as we look forward. The challenge first. You are hearing from both advertiser and competitor the pressure [Audio Gap] operating fees as well as the reduction in scope of work. The industry is facing structural headwinds on creative activities. From our end, we are addressing this with 2 strong action plans. First, we are rightsizing our cost base to remain competitive and profitable in these activities. Second, we are continuing to invest in data and technology to make our creative ideas stronger and even more effective and gain profitable market share. And this is where you find the positive indicator. Despite the headwind in the creative business that the market is experiencing, we are delivering positive growth in the U.S. at 1.3% in Q3, thanks to the acceleration of the implementation of our model. Overall, these financial results are a proof that we have robust foundations. As announced during the presentation of our plan, Sprint To The Future, we are accelerating our transformation on both our new model, powered by our game changer, and on our organization with no silos. In that respect, Q3 was again a productive quarter, and we are making progress in every of our strategic, operational and financial KPI. As we did during H1, we will update you again during our full year results in February 2019. With the traction we are gaining with our client when they engage with our model is really impressive. They immediately understand how we can become a critical partner in their transformation and help them grow and increase profitability. The best proof of this is our continued momentum in our new business wins. Just to mention a few of them, and you have the long list in the press release, in the last quarter, we announced Cathay Pacific globally, the advertising of Western Union globally; Nestlé media in Southeast Asia, Government of Singapore and Mondelez International media for roughly half of their market. And last but not least, as you might have seen, we have announced a win of GSK media, one of the biggest if not the biggest global pitch this year.There are 3 lessons to take from this pitch. They have been reinforced by Marc Speichert, the Chief Digital Officer of GSK in the press. First, there were at the beginning of the process 4 separate pitches. Three of them were our regions: Asia, Europe and America. And of course, we were competing against the classic holding companies. And the fourth on global digital was including constructing firm. Actually, they could have led -- this could have led to 4 separate contracts, but thanks to our data platform, People Cloud, we demonstrated the advantage of a global approach, end to end, and gain the trust of GSK on the 4 separate pitches. Second, mass migrations to our platform, Marcel, as a key differentiator in the pitch to properly manage the way we allocate talent but, even more importantly, as a concrete proof of our transformation. Last but not least, and as opposed to what some have written in the press, Marc clearly said that we were not the cheapest offer. We won based on our model, coming with original and innovative solution, building a long-term value business for our clients and offering the best return without compromising our financial criteria. For all of these reason, we feel confident that Publicis will turn our industry challenges into opportunities for our people, our clients and, of course, our shareholders. We are on track to deliver our number in 2018 and, more importantly, to accelerate that transformation. I will now give the floor to Jean-Michel, who will provide all the detail of our performance, and I will come back later to discuss the outlook for the rest of the year. Jean-Michel?
Thank you, Arthur. So good morning, everybody. And as usual, I will go now through a few slides detailing our financial for the third quarter and the first 9 months of 2018. I will start with net revenue on Page 6. Net revenue was EUR 2,197,000,000 in Q3 2018, up 0.5% versus last year. Currencies had a slightly negative impact of 0.8% compared to 7.7% negative impact we had in H1 2018. As a result, at constant currency, growth was positive at plus 1.3%. Acquisition has no impact because of the contribution of acquisitions being offset by disposals and the deconsolidation of Genedigi, a subsidiary in China, at the beginning of the year. All in all, organic growth for our net revenue was plus 1.3% in Q3. Excluding PHS, Publicis Health Services, organic growth was plus 2.2%. For the first 9 months of 2018, net revenue was EUR 6,477,000,000, down 5.4% versus last year. Currencies add 5.5% negative impact. At constant currency, growth was slightly positive at plus 0.1%. As acquisition impact was almost neutral for the reason I have mentioned previously, organic growth for net revenue was plus 0.2% for the first 9 months of the year. Excluding Publicis Health Services, we are at plus 0.8%. On Page 7, I will go through net revenue by geography, and I will focus on the performance excluding Publicis Health Services. Europe was plus 4.2% in Q3. As expected, we benefited from the contribution of accounts won earlier this year, namely Daimler and Carrefour. And at the same time, we no longer had the impact of Toyota account loss and the effect of GDPR. North America was up 1%, with U.S. being at plus 1.3%. We had the first impact of other account wins, namely Campbell's and Marriott while experiencing some headwind in our creative operation there. As Arthur said, our new model made us able to overcome the industry slowdown in creative operation, thanks to our new set of capabilities in data and technology. Asia Pacific turned to positive in Q3 at plus 2.5% after a decline of 3.3% in H1. The growth is clearly supported by account win contribution and, to a broader extent, by all the efforts made by the new management and its ability to win new businesses. Latin America was up 4.8%, driven by the strong growth in Brazil and Mexico. Middle East and Africa are up 1.5%, mainly due to the good performance of our operations in South Africa. Overall, Q3 organic growth for the whole group was plus 2.2% excluding Publicis Health Services. On Page 8, regarding year-to-date net revenue by geography, I will go only through the numbers, again, excluding Publicis Health Services: Europe, up plus 0.1%; North America, plus 1.1%; Asia Pacific, down 1.4%; Latin America, up plus 7.7%; Middle East/Africa, up 3.5%; and plus 0.8% for the entire group excluding Publicis Health Services. On Page 9, we highlight organic growth rates for the main countries for the third quarter of 2018 excluding PHS, Publicis Health Services, which operates mostly in the U.S. with a tiny exposure in the U.K. I will only mention a few of them. Above plus 10%, we have, for instance, Australia at plus 12%; Mexico, at plus 18%; and the U.K., at plus 10%. Between plus 5% and plus 10%, France was up 6%; Italy, plus 9%; and South Africa, at plus 6%. Between 0% and plus 5%, Brazil and China, at just above 0%; Germany, plus 1%; India, plus 4%; and U.S.A., above 1% at 1.3%. Several countries report negative organic growth rates during the -- organic growth rate in the third quarter, among which Canada, South Korea, Singapore, Spain and the United Arab Emirates. Moving now to Page 10. Before impact of IFRS 16, average net debt was EUR 1,499,000,000 over the first 9 months of 2018, down 27% year-on-year. Net debt at the end of September is EUR 1,834,000,000, down 20% versus net debt reported 12 months ago. Including IFRS 16, average net debt was EUR 1,410,000,000 over the first 9 months of 2018, and net debt at the end of September is EUR 1,742,000,000. And to finish my presentation on Page 11. Our liquidity stands at EUR 3.8 billion as of 30th of September 2018. Now Arthur, we continue with the conclusion. And as always, I will be available for questions at the end of the presentation.
Thank you, Jean-Michel. As you all know, our industry has been facing major challenges, and Publicis did not wait to react, implementing a profound transformation, thanks to the vision of Maurice Lévy. The plan presented in March, Sprint To The Future, unveiled how we are adapting our organization and how we are scaling up our game changer to become the indisposable partner of our client in their transformation. We will update you in H2, as we did in July, but so far, we are ahead on every strategic and operational KPIs. Our Sprint To The Future plan is already delivering early results. The account wins are a tangible demonstration of how our clients are responding positively to our model. This makes us confident about the long-term strength and our ability to benefit from the major challenges faced by our industries. As I said in introduction, those account wins already had a contribution in Q3 for roughly 100 basis points, and they should ramp up going forward. In the recent period, we have seen buying growth at any price become an increasingly easy option for some competitors. That does not create value, and it does not help our client that needs superior services and strong partners in this new world. We believe our model and our commitment to build a sustainable business for the long term is the right way to proceed rather than engage in a race to the bottom. We won't buy growth at [ unimaginable ] conditions, which would hamper our future and hurt our relationship with our client on the long run. But clearly, we have to face this highly competitive environment, and it requires adapting all the time. This is why we are accelerating on some initiatives, exploring new ones to raise our competitive advantage in a healthy way. Let me give you just one example. We have taken a pragmatic approach to our portfolio of assets. We need to scale up our game changer fast, and this requires to absolutely focus on our core expertise. Therefore, we are disposing assets that are noncore and which are not aligned with our strategies. We sold Genedigi in China. We have initiated the disposal process of PHS. We will continue to review our portfolio to be sure we are making the best use of our resources for the future. The objective is to shape our operation with a better mix of business. When it comes to the outlook, we confirm our objective to report better organic growth in 2018 versus 2017. As of today, we feel confident in delivering this commitment, and there are several factors that we take into consideration. On the one end, we have said repeatedly, Q4 is an adjustment quarter for our industry, and it can be very volatile as some clients may consider that marketing expenditure are a way to reach the results. On the other hand, there are elements that should drive an acceleration in Q4 versus Q3 like a much bigger contribution from our account wins that we have seen in Q3 and the continued positive effects of our game changer. As you will remember, in H1, we saw a growth of 27%. As regard to margin, we committed to improve our margin rate by 30 to 50 basis points. We have a strong grip on our cost structure and visibility through the end of the year that make us confident in delivering this objective. We should post a 5% to 10% increase in headline EPS for the full year of 2018 at constant currencies. This is our commitment to deliver shareholder value while we are transforming to build a long-term valued business. To conclude, I needed to say that Q4 will be another busy quarter, and I want to thank the team for what they have done in Q3 and, more importantly, for what they're going to do in Q4. We are working hard on scaling fast our strategic game changer, where we see the exponential growth and on simplifying our structure to gain efficiencies and, in the same time, continue to accelerate on our new business momentum. These elements will move forward positively to create long-term performance and shareholder value. In the last months, I've spent 90% of my time on the road, meeting our clients to present them our new model. All the signal we are getting from them confirm that we are at the right place, as you can see in our new business track record. And we believe that the model we have, and we are extremely happy to sit with our clients, will deliver the kind of growth they need while reducing their costs. This is, of course, giving us confidence in the future. Voilà, thank you very much for your attention, and we are now available, with Anne-Gabrielle, with Steve in London and Jean-Michel, to answer any of your questions.
[Operator Instructions] We'll now take our first question from Adrien de Saint Hilaire, Bank of America.
First of all, I want to ask you how much of a drag or of a boost was PHS on 2017 organic sales growth? Secondly, just a bigger macroeconomic question. I'm curious how worried your clients are by rising trade tensions and perhaps also rising commodity costs? And the last question, Arthur, you've mentioned a string of business wins in the first half. But I think in Q2, you also had a few losses, like H&R, KFC and a few others. So I'm just curious if you think these will have an impact on Q4 or perhaps 2019 organic sales growth?
Thank you very much, Adrien. So I'm going to take the question at reverse and start by the last one, which is the losses we had. You know what happened in new business is that you have a big brand with sometimes small budget and big brands with big budget or this big budget put in pitch. It's very difficult for you, and we can't disclose any number. Of course, to make the difference between the one that are really structural and the one that are not. The reason why I insisted on the few wins compared to everything that we have won is, of course, along the year, we win and we lose smaller accounts. You take the example of KFC. I could have tell you that in the same time, we won Burger King in the U.K. But at end of the day, we see that as small transaction in both sides, important transaction. Don't get me wrong. Every client counts, and we are fighting for every new business in the same way. But it is not representative, first of all, of something material in our number and, maybe more importantly, on the real test on who is having the best model at global level. So again, zero significant loss since the beginning of the year, a few very significant win and, of course, some significant loss and some small loss and some small wins that, again, we are reporting on a day-to-day basis but that we are not making a big point today. When it comes to the -- to what our client are having in mind, of course, the trade tension is one thing, and I won't comment that more than this today because it has different impact from one country to another. But what I'm experiencing, which is actually very striking and we feel very encouraging in our case, although it's had some challenge, is if we saw that a year ago, our client were obsessed by transformation, a year later, it's even more important. I mean, they see at which pace they need to transform to adapt, of course, with the economical context that you are describing but, more importantly, to the new competitive landscape and how they have to shift their marketing to make sure that they can enter it. When it comes to the drag or boost of PHS, I guess I will let Jean-Michel take the question.
Adrien, regarding the impact of PHS on the 2017 growth -- organic growth, it was a negative impact by 10 basis point. It was not so high. And regarding this -- your second question on the cost, I'm not sure to have picked up your question. If you can reset your -- I'm sorry, [ repeat ] your question, it would be fine.
Sure. So my question was about commodity costs and the fact that perhaps some of your clients, especially in consumer goods or amongst the carmakers, might be starting to be worried about the fact that commodity costs are rising and may be looking to reduce advertising and marketing spending.
There is always external factor that are obviously changing the way our client are investing. And this is why, by the way, we are cautious on Q4 also for this reason. But overall, what we see is that there is no more factor than there were in the past. They are maybe different, but again, coming back to commodity costs and what we can hear from the automotive industry, all the financial services or all of them, the biggest concern they've got and it's truer for the retail today, by the way, is how can they adapt to new competition in this new world. So this is really where we see at the same time the challenge and the opportunity. Because again, it represent the shift in their investments. When we are openly saying, as a competitor did before or as the advertiser and client are saying, that we see a reduction in fees when it come and scope. When it comes to creative, it is linked to that. It's today what they are looking is not to spend less overall, by the way. You won't find one of our client that is spending less overall. They are spending more but in a different way. And so the reason why we see positive momentum in the U.S. at the moment is because we are able to compensate what you can see as a reduction of fees, that everyone in the industry is suffering, by bringing personalization at scale with our unique model that connect data, dynamic creativity and technology and give us the opportunity to bring back momentum, although, of course, all the changes you mentioned are having an impact. Thank you, Adrien.
We'll now take our next question from Brian Wieser from Pivotal Research.
I was noticing [ like you gave market outlook like expanded ] quite rapidly. And I was wondering more generally in book there and elsewhere, to what degree the new business will contribute to the organic growth versus, let's say, selling new services on to existing clients? I wonder if you could talk a little bit about those trends. And then separately, could you talk about the degree to which you think that divestitures may contribute to the margin goals? In other words, let's just say that there is ongoing pressure on an ongoing basis in core businesses, do you have a flexibility or do you think you have flexibility to prune the portfolio of businesses you have to make sure that you can meet those margin expansion goals from that approach like in a year or 2?
Brian, I'm sorry to cut you. We heard the first question. We didn't hear well the second because this line is not good on our side. So could you just briefly repeat the second question because it's difficult to hear here.
Yes, I'm sorry about that. The question was on margin expansion and the degree to which divestitures may help you get there if you needed to. I think there's a lot of concern that clients are trying to pressure margins that you have in any way that they can. And if those pressures continue, I'm just curious about the degree to which you have other low-margin businesses which you could divest to make sure that you can make your margin goals no matter what, essentially.
Okay, I got the question. So I'm going to start by the second one to see if I heard you well. I think at least we are clearly separating our objective of margin expansion with the divestiture. I mean, as we discussed, we saw you at the end of Q2. We told you that we'll go through a strategic review on PHS. We took an immediate decision that it was time to focus on really what is the core of our business for a very simple reason, by the way. We are shifting from being a holding company to a platform. And as a holding company, we could have kept these activities. But if we believe that our future is to connect data, dynamic creativity and technology, we need to make sure that we focus on that. And so again, what we are trying to build here is a model that we deliver growth and reduce the cost of our clients and focus on this. So the reason why we are disinvesting in some areas is only for strategic purpose. Of course, we want to deliver profitable growth, but we also want this growth to be strategic because if we still want to build what we believe could be the future of our market, which is someone that is bringing the convergence between marketing and business transformation, we need to make sure that we focus all of our efforts on that. So yes, we will continue to divest, honestly, on smaller thing. I think we have been with the bigger on PHS. But if we consider that there is a business that is not making the best use of our attention, of our energy, of our cash, of our relationship with our client, we will divest. And on the other side, as you know, we will do some bolt-on acquisition that will help us get traction and scale on what is growing at the moment at 27%, which is our game changer. Now -- and hopefully, you are seeing this -- since we made the acquisition of Sapient, we have been extremely disciplined in the way we have been making acquisition. And we will be even more now that we have a clear plan about -- if it's about data, if it's about dynamic creativity, if it's about business transformation, we know that is bringing immediate growth and profit, so we will move forward. If it's something else, we won't look, as we did on Acxiom, or we will divest if it's not core to us. So again, margin expansion is very important for us. And because we want to build a valued business, and we have made a commitment on that, making sure that we have the right model is going through that because it's through the model that you will get the margin. But one has led thing to another. Coming back to your second point -- for your first point, actually, on the growth and, more importantly, the contribution on new business. We said clearly that in Q3, we had 100 basis points of contribution from the new business we have won at the beginning of the year. So you can go through Marriott, you can go through Daimler, Carrefour, Campbell, Macy's, 100 basis points having an impact on Q3. Of course, we are hoping and we are seeing this ramping up in Q3 for a very simple reason. It is a big piece of business in several countries, where it takes time to put the thing in place. But again, this 100 basis point make us very confident for the future. The second source of growth that you mentioned is what we call the strategic game changer, i.e. our ability to deliver a connected model between data, content and technology that brings personalization at scale. As we said in H2, we are seeing a huge growth there, 27% in H1. We are not disclosing this number on the quarter, but we'll do it at the end of the year. But again, we see very encouraging sign at the moment. As I said when I mentioned the KPIs that we're not disclosing here, but we'll disclose at the end of the year. The next question is for Steve King, whatever it is.
We'll now take our next question from Tim Nollen from Macquarie Group.
This is for you, Steve, a question, actually. I was curious about the tone of underlying business. Omnicom, this week, mentioned that they thought things were looking a little bit better, and I wonder if you can contribute any comments on that in addition to hearing clearly what you're saying about the new business contributions. And then secondly, very quickly for Jean-Michel, please. Could you give us an update on currencies' impact into the rest of this year?
So we're going to start with Steve, then we'll move on to Jean-Michel.
Okay. Thank you, Tim. Yes, I think, look, just going back to the question that was raised earlier and to the question you're asking about, what are the -- are we seeing some uptick in the macroeconomic environment, and one of the other questions involved, the impact of trade sanctions or commodity prices. I think the -- what we're seeing is we're seeing a very firm economic environment in the U.S. and, of course, in China. And these markets -- these 2 markets are going to account for something like 26% and 22% of the additional ad expenditure over the next 3 years. So the -- and then you look at the next rank of markets which are growing, like India or in Indonesia or in Brazil, Russia, South Korea, generally, across these markets, you could -- there is a suggestion that the economies in these markets in ad investments is growing. Of course, when you sit as I'm sitting today in London and you're sitting in the middle of the raging discussions about Brexit, you don't feel the same economic well-being that you feel in some of those other markets I've just mentioned. But our ad expenditure forecast, which is I'm sure you all know, we're forecasting 4.5% growth this year. So the market's going to reach some EUR 581 billion by the end of the year. And we're predicting -- we're releasing our forecast at the beginning of December. So I certainly think to the earlier question, to yours, Tim, that the economic environment operating in is reasonably stable. We're not seeing any reason to downgrade on a global basis. And there are some evidence that perhaps the market might be a little stronger for us next year. And as Arthur has said in one of the questions earlier, the things that we're doing in terms of adjusting our cost base, which is being tough, and we've been doing that since we started in our new roles in June of last year and the investments we're making in data and technology, hopefully, that is going to make sure that in despite whatever the economic environment, we are going to be growing our market share in what is unquestionably a tough sector that we're in. So you've heard some of the successes that we've had from our current clients, and we seem to be having some strong performance in terms of gaining new assignments. And interestingly, as Arthur has said, nearly all of these new assignments we have got data and technology at the core of our proposition. So I think there's certainly some optimism in our group that the focus that we've got and the way we're using our assets, and you've heard about Marcel, our capabilities in India, the way we're leveraging the expertise in Sapient is beginning to have a positive reaction despite the economic environment we're operating in.
Thank you, Steve. And now, Jean-Michel, for the second question.
So Tim, the second question, we are already at the end of September, and currency impact on the -- for the first 9 months of roughly EUR 380 million, this is -- you will find that in the appendices, which means that with -- based on the current rates that we have, which will have a full year effect of roughly EUR 400 million.
We'll now take our next question from Charles Bedouelle from Exane.
So actually, I have a question for Jean-Michel, a question for Steve and a question for Arthur, so no jealous here. So maybe the question for Jean-Michel is, can you confirm that the guidance of 30 to 50 bps is excluding any disposal of PHS, which will be margin enhancing? That's just to be clear. I think the question for Steve here is, you mentioned -- or Arthur mentioned that consultancies was within the last kind of big GSK digital pitch. So I think it's the first time we hear that they are present in such a big global pitch with the big advertisers. So are you surprised? And does it change anything to the competitive dynamics going forward? And the third question, maybe more for Arthur, is we talk a lot about the pressure on scope and feel in creative works. I think it's mostly apparent in the U.S. Would you expect that to come to Europe and the rest of the world? Or can you just comment maybe in terms of geographical trends within that trend?
Thank you very much. I guess we're going to start with Jean-Michel because he's going to be the shorter, and then we'll move on to Steve, and I'll take care onto that.
It will be short. It will be extremely short. The guidance, of course, we -- that we have for the margin is -- it include the PHS, obviously. But we have to take also into consideration that some acquisition which would have or could have some dilutive effect on the margin, too. So all in all, the guidance remains the same.
Thank you. Question #2 is for Mr. King.
Okay. So yes, it's an interesting phenomenon. We are not often -- or that we're only rarely seeing, let's say, the ad competition coming from outside the holding companies. And certainly, if you look at the experience over the last, let's say, 18 months, and you've seen that we've had very strong success, I think we're the #1 in terms of business success according to convergence over the first half of 2018, and it is unusual to see competition from the consultancies. But as you heard from Arthur, in this particular case, they were unsuccessful, and I do not know of a single instance where we've lost one of our major assignments or any significant part of that to one of the consultancies. I think the interesting twist on that is that as we build a proposition, and we obviously have, as you know, this business transformation capability through Sapient, and we are building a -- and we're trying to transform the -- let's say, the more traditional side of the business, the media and the creative, and we're trying to put data and technology at the core of that, and we obviously have the ability to deliver on a global basis, and you've heard of the -- some of the successes we have in GSK, it's a really good example, and Marriott is another because of these are clients that come to us, where we previously had not been working on there -- on the -- in this case, the media assignments. We've got the ability to execute at scale across all markets. And so actually, I think I would turn this around and say, so we're not -- we are seeing competition occasionally, infrequently from consultancies. We have yet -- as yet, not -- as far as I'm aware, we have not lost any assignments. And I think actually, the way that we're building our proposition will put us on an offensive footing, so the -- I think that we will look for scope of assignments from clients that would not traditionally have come to the advertising holding company, certainly not to Publicis. And the way that we're building our solutions around taking this aggregation around data and technology in a really compelling way and have a network that can execute locally in market, I think, changes the story into one that is quite positive and offensive for us.
Thank you, Steve. I will have just -- I will add one point on that, that will actually be a good segue to your third question. I mean, we are building a model that is pretty simple. We believe that we need to have 2 strong pillar: one in marketing transformation; one in business transformation. And we believe that the way our client will grow while reducing their costs is by connecting marketing and business transformation. And to come back to your question about where we see the consultancy, on the marketing transformation business, which is a core of our business, where we are competitive in competition with the other holding companies. Sometime, we see some consultant in the first round. Never we have seen a consultant winning at the end of the race maybe because they don't have the scale, maybe because they don't have the expertise, but honestly, we don't see them there at the moment. Where we see them, which represent the conflict of interest, is that in some cases, they are the same, that they are advising the client to do a pitch. So in this area, we don't see them. Now when it comes to business transformation, where we have a scale expertise with Sapient, of course, we are seeing the consultant and the system integrator. And although we are smaller, we have a proposal that is at least as competitive as we are gaining traction. What is very interesting in the case of GSK -- but the reason why I'm talking about GSK is because the client has been talking in the press. If not, I won't mention that in detail. I would stay general because what I'm telling you for this pitch is actually true for all the other pitch that you have seen -- is that where our model is unique is that we can bring at the same time a redefinition of the consumer experience to make sure that you bring the right level of engagement for the brand and go deep into the business model of our clients and transform it through technology to make sure that it's efficient in term of marketing. And so this is why we are so confident in the future is that we know that the formula is there. By the way, we are not the only one who rule. When you look at how some, like Accenture, are moving into our business, buying with very high multiple creative agencies, it says a lot about the fact that the convergence is coming there. The question is, who is going to win? Who's going to be able to bring that at scale? And we believe that there is a huge cultural barrier, first, but it's really important to understand. And we have experienced that with Sapient is how can you bring together in general and creative to deliver personalization at scale. And so this is where the fact will be. And of course, we will see some consultancy. But for the moment, on our marketing business, we don't see any significant win. This is a good segue to your last question, which is pressure on scope. So the biggest pressures in the U.S. -- and by the way, as you know, it has been disclosed by our clients and by some of our competitors and -- but the real question there -- and the rest of the world, of course, we are experiencing, but nothing new, I would say. Indeed, this is something that we have to take into account. What is really important and what is maybe the biggest trend in our industry at the moment when it comes to competition is that you can't win a creative pitch without the media expertise. And you can't win a media pitch without a creative expertise. And you can't do both without the technology. And the reason why, again, we're having this track record is we never come to a client saying, "We're going to fix it -- we're going to bring you the best way to use your media." We come to a client, and we say, "We're going to tell you how your media is a fuel for growth and transformation." And we come with an end-to-end model that, of course, we are the only one that can bring to life for 2 main reason. The first, again, is cultural. 4 years ago -- 3 years ago, actually, Maurice Lévy decided that it was time to bring the Power of One. We have broken the silos, and so when we come into one room, you can't make the difference between the different expertise, and we are still a people business, so that matter. And second, we have Sapient. And as I said also, it has been difficult to integrate. When we said to a client that we can bring a model that he sees on PowerPoint to life, we have in India 10,000 engineer that are extremely strong, by the way, not cheaper than the one that you can find somewhere else but much more experienced, at scale because scale is what matters, that can make this happen.
We'll now take our next question from Ian Whittaker from Liberum.
Just actually one question, and it actually sort of builds on what you just said. I mean, there's been a lot of talk about the structural pressures on creative. What we haven't thought much about is actually media. So the traditional media planning and buying has been a high-margin sort of business for the agencies. You obviously have a very strong business in North America. And yet if you look at the secular trends that are going on in terms of you've got advertisers bringing media buying in-house, you've got platforms, certainly, some media companies, like the broadcasters and outdoor companies telling us that, essentially, they want to go more direct to the advertiser in terms of how they sell their product, and so that potentially bypass the media buyers. You've got the concerns over the so-called ad tech tax. You've got concerns over whether money is being spent effectively. Just in terms of all those trends, you've said that, essentially, sort of media and creative are intertwined. But actually, sort of -- what do you think are the risks to your media business sort of from disintermediation? Because it does seem as though that sort of both sides of the equation are actively trying to take business -- take that sort of area back to themselves. And potentially, that leaves you sort of cut out of the equation.
Thank you very much, Ian, and I guess we're going to go live in London with Mr. King.
Okay. Thank you, Ian. I must say, it's some time since someone's asked us about disintermediation, so I'll come back to that. Look, it's just -- it's perhaps a little bit off the question you've asked, but this week, we're celebrating the 30th anniversary of Zenith. Zenith was the first media agency born out of an advertising group, and obviously, it was a pioneer. And over the years, many times, external pundits have said, "Is this media specialization, is there a future for this business?" And certainly and interestingly, let's say, 10 years ago, we were going to be disintermediated, apparently, by Google and Facebook. And clients would want them to act as the -- as both the creators of content and the deliverers of those -- that content. And yet surprisingly, we've seen that the media agencies continue to grow, not just us, I suspect our competitors. And definitely, if I look at Zenith, which started 30 years ago with -- and I was there at the beginning with 100-odd people, Zenith, which is one of our leading brands, now has something like 7,500 people and, as far as I can remember, has grown every year from -- I'm going to say the last 20 years. And one of the reasons, Ian, I think this is so relevant, and to specifically answer your question, is in media, the barriers to entry are becoming much, much higher, much tougher to get into. We used to compete against small niche players. But previously, if we go back, say, 10 years, it was all about scale and media buying. You needed to have media buying in order that you could compete and offer the best prices. And that's still the case. The benefits now and necessity of scale is about leveraging data, technology and talent. And right now, you mentioned about clients in-housing, for example, and I'm sure many clients look about how they can make their operations more efficient. And yet if you look at in-housing, for example, you look at programmatic, we've got huge momentum in that particular part of the business. We work with -- we have something like 400 traders. We're buying programmatic. We're doing this out of our major centers. We've got huge technology. We've got big training platforms. And obviously, we've seen and we've -- you've all reported, the clients are looking occasionally at in-housing programmatic as one area and that disintermediation. I can tell you that compared to a year ago, we actually have a smaller proportion of clients in-housing than a year ago. And one of the reasons for that is because it's really tough to do. You need to have access to best platforms, agnostic technology. You need to be able to hire experts. You need to be able to maintain that, the technology you need to use, the DMPs, the DSPs, the vetting, the vendor analysis, et cetera. It's a really, really specialized area. So the answer to your question, Ian, is that I think there's definitely been many challenges to the media sector. I feel that the challenges that we've got, we are actually really well set up in media. I think the barriers to entry are growing. It's interesting that we've seen in the previous question, the new competitors trying to come in has yet not making a significant mark. And as our business becomes more complex, clients are increasingly asking us not just to be their executional partner, which is how we originally engaged just -- could we handle their media buying? It's much more about how we could be their strategic partner, helping to grasp and analyze data? How can we execute at scale? How can we manage the inventory? And of course, how can we inform creative division -- creative decisions on a dynamic basis? So I hope I've managed to give you some reassurance that while the environment is changing, technology is having a huge impact, I see most of that having an advantageous effect on the media environment and, indeed, the role that we play, as Arthur has said, in terms of connecting media to creative decisions, particularly as we move into the creation of dynamic, reversing creative and as we link to the business transformation area in Sapient.
And just a quick follow-up on that. Sorry, just a quick follow-up. I mean, like it was a very sort of -- that was a very good answer. I mean, just in terms of the noises that we're hearing from some of the outdoor companies, some of the broadcasters in terms of wanting to go more direct, sort of joining up together to offer sort of programmatic services themselves, to try and go direct to advertisers, sort of would you say that what you've just said now would pretty much apply to that potential threat as well?
Broadly and yes. I think the -- there's -- running an agency business servicing client is really different to producing content. And there's an advantage in having an agent who can act as a gatekeeper to clients' need, interpret those needs and then execute those client -- those needs. I mean, absolutely, when you talk of many of the content producers, we are partnering with them in developing content that is relevant. We're -- absolutely, we are using those publishers and distributors in a much more engaged way. But I think the relevance of your question, if you think -- I think if you'd have gone back a few years, let's say the digital platforms, and we can think most obviously of Google and Facebook, I'm sure, even privately, they would have said, "Oh yes, we can see us having a much larger direct relationship with clients." And absolutely, they -- the clients, because it's such a specialized area, have much stronger relationships with the leadership of those digital platforms and some of the more traditional ones. But it is not supplanting or replacing the role that we do in terms of advising our clients on an agnostic basis how best to make enduring connections with their consumers.
Thank you, Steve. I mean, time is flying. I would have loved to tell you why actually we are seeing media as an even more strategic asset today, thanks to data, and how we can help our client take better decision not only on the marketing side but also on the business side, but I guess we are running short of time. What I would ask, if it's possible, is if we can one -- have just one question per person now as we're committed to finish at 11, and we are already late. So we take the next question. If it could be one, it would be great, and we'll do that with a couple of them thereafter.
Our next question is from Omar Sheikh from Morgan Stanley.
Just a question for Steve. Steve, we've had, obviously, a big pickup in pitch activity. Arthur has talked a lot about your success in new business wins. Could you maybe give us some help in understanding whether or not you think the pace of new pitches might slow down as we sort of get into 2019? Or do you think the level of pitch activity that we've seen this year is kind of a new normal? And if I could maybe just ask you to speculate widely about the -- obviously, the one very large pitch that is still out there with VW, it'd be great to hear maybe your confidence on that particular piece of business.
Thank you, Omar. As you can imagine, we'll have no comment on the ongoing pitch, but I will let Steve give you the big trends.
Okay. So I think, Omar, the honest perspective is I don't know, just to be honest with you. I think, certainly, we've seen this mediapalooza this year, and we've seen a huge amount of pitch activity. And a lot of that pitches has not -- the trend has been moving away from price orientation to more the right strategic partner. I have a hypothesis that, that will actually mean that many of those clients are now going to work on a much more long-term basis with their agency partners as we build much more scaled data and analytics solutions with technology platforms. I think those solutions that we're building will give us more stickiness. It's -- so that's one thing. So I think this -- I think we will see an elongation of that pitch cycle for reasons that you could understand. Whether we -- the level of activity next year -- Q4 and next year, I think, is really difficult to predict. We were surprised, to be honest, with the level of activity that we've been invited to compete for in 2018. It's too early to predict whether we will see that same level of activity for next year. I think by the time we do our next earnings call in February, we'll have a much better indication.
Our last question comes from Thomas Singlehurst from Citi.
It's Tom Singlehurst from Citigroup. So the question is, obviously, media -- I mean, actually, the comments about media that resonate with what we hear probably a bit from a lot of the agency groups, media is much more robust even though there are concerns about disintermediation. But against that, obviously, creative is under a lot of pressure. I just wonder whether you could actually -- just at a high level, just quantify that because there's a lot of talk about how much pressure it's under, but we don't know whether that's sort of minus 3, minus 5, minus 7, minus 10, minus 15. Is there any number you can put alongside that -- the pressure on creative, just so we can then get a sense of what the rest of the business is seeing?
I mean -- no, thank you very much. First, we can't give you this number, and it's -- I'm realizing that what we are seeing about the creative business is pretty unfair for a simple reason is that we should never forget that at the core of our value proposition, there is creativity. The reason why we are so confident in the future is that not only we understand the consumer as a data, not only we can build the right experience, thanks to technology, but we can bring the emotional value that will make the difference. If I take the example of Citi, you can't have the best experience if what you are seeing doesn't resonate in the consumer mind, you won't justify your premium, and you will be eaten tomorrow by a newcomer. And so what is difficult is to see what creative means -- what creativity means in term of revenue and growth and what creativity means in term of value to accelerate on the rest. And so the reason why we are growing in the U.S. today, and this is the most important point, is that we are convinced that it's about connecting creativity, making sure that it's right through data and working through technology. And so as we said, we see -- are seeing a reduction of scope and a reduction of fees, but the value creativity brings to the mix will always be there and, by the way, will be reinforced in the future. So sorry, we can't give you a number -- a precise number, although we are clearly saying, as every advertiser is saying and as the competition is saying, that we see a reduction of scope, but we shouldn't look too much at that. We should be focused on how creative bring value to the whole because, again, if you do that, you see the kind of growth that we have with our game changer at 27%. We would've never had 27% growth on the game changer if they were not the creative idea at the core. If not, they can go to a consultant. We're going to take the last 2 questions, if I may.
Our next question coming from Julien Roch from Barclays.
Actually, we have 2 questions, but they're really quick. To make your full year target of growing more than last year, i.e. 0.8 to 0.9, you need 2.6% to 2.8% growth in Q4. Will that be with or without PHS, i.e. will that correspond to the 1.3 or the 2.2 you reported in Q3? That's my first question. And the second one is, in the press release, there's no mention of the EUR 900 million of extra revenue versus 2017, which was the guidance at the Investor Day. Do you confirm that extra EUR 900 million of net sales?
I will leave the 2 question to Jean-Michel, but I can do the first and third, yes? And the second question, Jean-Michel?
The second question, so we -- a lot of this objective relies on the base at which we are scaling up our game changers. So the key indicator for us is, clearly, the 4% organic growth rate for 2020, as you know. And given the feedback we are receiving from our clients and the favorable new business momentum that we have highlighted several times today, I'm still very confident -- we are still very confident with this objective.
Again, it's about winning market share. To be clear, we need to win market share. The better is on maintaining that. It's not an easy one; it's far from being one at the moment. But we have, again, an impressive track record so far, but we don't take anything for granted. If we want to achieve this number and, by the way, ramping up in the future, we will need to win the market share that we are actually constantly looking for with our existing clients because we want to believe that you will see consolidation within our client in term of number of agencies. GSK is a great example. And we want to make sure that we win market share with new client. This is how we'll get to this number. Thank you very much. I'm sorry, I'm going to take the last question, and then we're going to be done, I guess. I said 11. We are late.
Our last question comes from Richard Eary from UBS.
Earlier in the presentation, you talked about portfolio rationalization. I don't know whether you can expand on that in terms of the magnitude of the portfolio, do you think that could come under review; and actually, what you plan to do with the proceeds from that review.
Yes. So thank you for the question. It would give me also, by the way, the opportunity to conclude. Again, as I said, and this is extremely important, is we believe that we have a plan, and we are seeing extremely good result on this plan with our client at the moment. And I want to believe that this is a big advantage compared to competition is that we know exactly what we need to do to succeed. And part of it is to make sure that we focus on what bring value to our client, which is connecting data with dynamic creativity and technology to bring 1:1 personalization at scale, okay? This is what we have to do. So to come back to your question, don't expect us to do a big move in term of divestment in the future. There won't be any, but expect us to make sure that we focus on what is our core business and, though, maybe divest a few smaller activities that are not core to us, sometime distracting us, but for sure not actualizing the growth and the profit we need. This is why, by the way, we talk so much about bolt-on acquisition. We're going to continue in the coming months to make some announcement there. We are actively looking for smaller operation that can bring either talent or expertise that can accelerate our game changer. When you see 27% growth on what is the future of our business, your objective shouldn't be to be a professional or the sales representative in the U.S. By the way, it is a fantastic business, and I'm sure that the one that will buy it tomorrow will do great because it will be its core business, it is not ours, and again, we are talking about divestment. You will see the investments that we are doing on the other side. Look, so thank you for the question. I'm sorry as we -- that we are 5 minute late. I will take maybe 1 minute to conclude, to tell you that I hope you have taken 3 things out of this call. The first is that we are on track with our internal forecast in term of organic growth, and we are on track for the rest of the year. The second thing -- and thank you for asking question on that because this is the core of our business -- at the end of that day, what matters is when we confront our model with the other holding company model or, by the way, the consultant model, at -- be at scale over the world for big companies. And we are seeing a real momentum. It's extremely hard. I won't tell you that it comes easy because it means transformation on our side and transformation on the client side, but we know that the recipe for winning is there. And to come back to earlier question, this is how we will find stronger growth that we have to deliver. And last but not least, it has been in the DNA of this company. Maurice has been incarnating that for a year. We are committed to transform and to adapt. And what we are announcing today with PHS is an additional proof of that. So thank you very much. Jean-Michel Bonamy, that is in front of me, is now ready to take all of your question offline, and we wish you a very good day. [Foreign Language]
This concludes today's call. Thank you for your participation. You may now disconnect.