Publicis Groupe SA
PAR:PUB
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Publicis Groupe SA
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Good day and welcome to the Full Year 2017 Results of Publicis Groupe. Today's conference is being recorded. And at this time, I would like to turn the conference over to Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead.
Thank you. [Foreign Language] And welcome to Publicis Groupe 2017 Earnings Call. I'm Arthur Sadoun, and I'm here with Jean-Michel Etienne, our CFO. We are in Paris, where you can actually do ice skating today in the street. Has been difficult to be altogether [ in the room ], but here we are. On the last call -- [ last calls ] we did actually, the 4 members of the directors were present. Our Secretary General, Anne-Gabrielle Heilbronner, is with us today; as Steve King, the CEO of Publicis Media [Foreign Language]. Jean-Michel Bonamy is also with us and will be ready to take your question offline after this session.Today, we won't do a deep strategic update as we did in the 2 previous calls. As you know, we will hold a full Investor Day at the end of March to tell you why Publicis is better armed to turn the different challenges the industry is facing into opportunities for our group. So during this call we'd like to do 3 things. First, of course, go through the 2017's number, then review briefly what was achieved last year in term of transformation and share with you the first encouraging results that we are seeing, and finally take your questions. Now, if I may, let's dive into the presentation. I won't read the disclaimer, but please have a look, as it is an important legal matter.Let's begin with the highlights of the year. No doubt, 2017 has been a challenging year for our industries. At Publicis and in this context, we have actually been focusing on 2 things; delivering and transforming. Actually, delivering while transforming and we're going to spend time on that today. First, let's look at our financial performance. We delivered in 2017 what we expected in term on financials with solid results. When it comes to growth, we have succeeded in showing a sequential improvement during the course of the year. After minus 1.2% in Q1, plus 0.8% in Q2, plus 1.2% in Q3, we delivered plus 2.2% in Q4. It actually confirms our forecast of a better H2, which is at plus 1.7% versus H1 at minus 0.2% with a satisfactory Q4.There are also some encouraging signs in our performance by geographies. Jean-Michel will come back more in detail. But it's important to note that the U.S. showed a very strong recovery with plus 3.5% in Q4, which was the best performance in the industry, and plus 4.5 -- sorry, in Q3, and plus 4.5% in Q4. So here again a sequential improvement from 3.5% in Q3 to plus 4.5% in Q4. Our [ firm ] and our organization are getting traction in the U.S. and I guess I'd come back to that in the question. This is making half of our revenue, as you know, and it is why our transformation is most advanced. It is for us a very good sign to see those first results there.When it comes to margin, we always made it clear that controlling our cost base was among our top priorities. We were able to show a 40 basis point increase in our operating margin at constant restructuring costs. Operating margin rates reached 15.5%, including EUR 120 million of restructuring charges. At constant currency, we were even able to increase our operating income in value by 0.7%, even though restructuring charges were much higher than last year. Against the backdrop that you all know very well, and I didn't come back to that in detail, Publicis Groupe have foundations that are truly robust.Year-end net debt is at the lower since 2014, amounting to EUR 727 million with a reduction of more than EUR 500 million in 2017, even after more than EUR 0.5 billion spent in cash dividends and share buybacks. This was driven by a strong free cash flow of almost EUR 1.3 billion.No doubt, if you take a step back and look at the global picture, Publicis Groupe is now stronger than 1 year ago. As an evidence of our confidence, the dividend for 2017 that we will propose through the General Shareholder Meeting in May amount to EUR 2 per share, up 8.1% compared to last year, reaching nearly 45% of payout ratio.But we don't want to think that we are satisfied with those results. We take them for what they are and this is what we're going to try to demonstrate. They are an additional proof that Publicis Groupe is resilient and that model we are building is already showing some encouraging results, despite market and of course our own challenges. We know that there is no other alternative than to profoundly transform ourselves to really bring to our clients what they need and to take the leadership of the markets. It is the only way to deliver on the financial results you are expecting from us.I would now leave the floor to Jean-Michel for more detail on our performance. I will then quickly come back on our transformation during the last 12 months, before of course, taking all of your questions. Jean-Michel Etienne?
Thank you, Arthur. Good morning, everybody. As usual, I will go through a few slides detailing our revenue for the fourth quarter of 2017, then revenue and results for the full year of 2017. And as usual, you will see more detail, which have been provided in the appendices that you'll find in the presentation.So starting with the revenue. You will see in detail in the appendix on Page 40, the impact of currency and acquisition revenue contribution. Revenue for the fourth quarter of 2017 was EUR 2,583,000,000, down 3.1% versus last year. At constant currencies, the growth was plus 2.7% in Q4. Currencies added 5.7% negative impact and acquisition impact was very small, at plus 0.5%. As already covered by Arthur, the most important is organic growth, at plus 2.2% for the quarter. We are delivering another sequential improvement after minus 1.2% in Q1, plus 0.8% in Q2 and plus 1.2% in Q3.Revenue for the 12 months of 2017 was EUR 9,690,000,000, down 0.4% versus last year. At constant currencies, however, growth was plus 1.3% for the full year of 2017. The impact of currencies was a negative 1.7% and acquisition contribution was plus 0.5%. Hence, organic growth for the full year was plus 0.8%.When we look at our Q4 revenue by geography now; Europe was minus 1.8%, after a plus 2.4% at the end of September. There is the combination of several factors, including tough comps as Q4 2016 was up more than 5% and a weaker advertising market in some countries, including Germany and Spain.We are really pleased to see North America accelerating in Q4 at plus 4.4% after plus 3% in Q3 and in particular, as already detailed by Arthur, the U.S. went up 4.5% in Q4 with the benefit from last year's accounts wins. By client sector, FMCG showed a slight improvement over Q4, compared with the performance at end of September.Asia Pacific was down 0.4% in the quarter, mostly due to China, where 1 of our agency has been under strategic review and we are expecting to close this disposal of this entity shortly. We hope to see that by -- currently in Q1 2018. Excluding this agency, Asia Pacific was up 3.4%, very important.Latin America was up 8.7%, driven by the strong growth in Brazil, the latter going up more than 20% over the last 3 months of the year, benefiting from the wins of Petrobras and Bradesco earlier in 2017.Middle East and Africa were up 6.4%, mainly due to some phasing in Arab Emirates, plus 25% in Q4 after plus 1% at end of September. Overall, the Q4 organic growth for the entire group was plus 2.2%.If we analyze now the organic growth by geography for the full year of 2017 on Page 10. I will just read the slide, because the details are more important on the quarter. Europe is plus 1.3% overall during the year 2017, North America plus 0.5%, APAC minus 1.5%, Latin America plus 4.8% and Middle East and Africa plus 4.4%. This is leading to an organic growth rate of the group at plus 0.8%.On Page 11, we are highlighting the main countries in term of growth for the full year 2017. Above 10% growth; we had Argentina at plus 23%, Russia at plus 13% and Turkey at plus 19%. Vietnam is also at plus 19%. Between 5% and 10%, Australia was plus 7%, India at plus 6%, Mexico at plus 8%, UK at plus 6% and United Arab Emirates at plus 8%. Between 0% and 5%, you will find Brazil at plus 5% for the full year, France at plus 1%, Italy at plus 4%, South Africa just about flat. US, as already mentioned, was at plus 1% for the full year. But a very strong second half of the year with Q3 at plus 3.5% and Q4 at plus 4.5%. Some countries are in the negative territory for the entire year, such as Canada, China, Germany and Spain. Now I will cover a very specific subject on Slide 12. There are several points which have to be mentioned. Our auditors and few financial analysts received a unanimous letter, accusing Publicis for anticipating the implementation of IFRS 15, and this should have been done in order to boost organic growth. This is of course totally wrong. We never did it. There was clearly an attempt of destabilization. We formally denying those allegations on January 23. First, by immediately informing the AMF, the French Stock Market Authority and then by immediately issuing a press release to inform the markets. As per the rules, the implementation of IFRS 15 is happening from January 1, 2018 and the impact will be more than EUR 600 million of revenues to be added to the EUR 9,690,000,000 revenue. There will be also other small impacts and we will disclose these impacts, obviously, at the Investor Day.As this letter created some concerns, we decided to conduct a full analysis of our methodologies, which confirms that we are fully compliant with IFRS and our organic growth calculation methodology, totally consistent with what we did in the past. We want to be fully transparent and as you know, revenue recognition is made contract by contract and is partially judgmental. It is recorded gross when the group acts as principal and net when the group is acting as an agent.The finance team spent a significant amount of time to ensure that the classification of each contract is correctly done. We talk about the review in that case of thousands of contracts. Our auditors spent time in reviewing this matter and it has been concluded that our organic growth has been calculated under the rules and on a consistent basis. Certain type of contracts were treated on a gross basis in 2017, when they were treated on a net basis previously. The activities involved were production and events. To make it clear, no media or advertising activities were involved in that reclassification.The table on Slide 12 indicates the impact of reclassification of our organic growth we reported. As you can see, the impact was EUR 33 million for the full year 2017, representing 40 basis point, it is absolutely not material, but it has been stated by our auditors. And for Q4, 2017, our organic growth actually includes a negative 90 basis points impact due to this reclassification. So I guess we have covered this matter and you get here all the details -- possible details.Moving to Page 13 now, starting with the detailed P&L. 2017 revenue was at EUR 9,690,000,000, down 0.4% year-on-year. EBITDA at EUR 1,666,000,000, decreased by 1% and the operating margin reached EUR 1,505, 000,000, which represents minus 0.7% versus last year. And as Arthur said, going up 0.7% at constant currency. Operating margin rate was 15.5%, 10 basis points below 2016 and I will come back to this obviously on the next slide.As a result of lower interest and tax that I will cover separately, the headline group net income was EUR 1,037, 000,000, up by 2.2%. Amortization of intangibles was EUR 55 million net of tax. There was an impairment charge this year of EUR 115 million, which relates mainly to Genedigi, this agency that we have in China, that we are currently disposing, and also Proximedia. The U.S. tax reform had a EUR 61 million positive impact in 2017. I will provide more color on this in a bit -- a bit later on. The revaluation of earn-out was an additional charge of EUR 66 million, which is always seen as a positive, as it implies improved earnings prospects coming from the related acquisition. All in all, group net income for the full year of 2017 was EUR 862 million.Let me come back to the operating margin details with 2 slides. First of all, personnel cost went down 2.2% and represents 60.4% of revenue versus 61.5% last year. With these improvements, we're seeing the benefits of the simplification of our structure launched early 2016. Restructuring costs were EUR 120 million versus EUR 73 million last year. For 2018, we are expecting restructuring cost to be close to EUR 100 million, as more transformation measures are being implemented and as we are accelerating the integration of our operation. Country-led organization is a clear example of this reorganization.Other operating expenses represent 21.1% of revenue, an increase of 60 basis point versus last year. I will comment on this at the time of the source of change to operating income on the next slide. Depreciation represents 1.7% of revenue, in line with last year. Overall, the operating margin rate was 15.5%, decreasing by 10 basis point versus last year. At constant restructuring charge, operating margin rate went up 40 basis points, which is a satisfactory performance, giving the low organic growth rates we achieved in 2017. This confirms that our transformation program starts to deliver on the cost side and we expect more to come in the future.If we move now to the next page, where we are presenting the change in operating margin as a percentage of revenue. There are few items which deserve to be explained. This is a year-on-year change. First of all, as you can see, exchange rates and acquisitions had no impact on the margin rate year-on-year. As already said, we incurred a significant amount of restructuring charge in 2017, representing an increase of EUR 47 million year-on-year. If we eliminate this increase from the 2016 margin rate, the 2016 margin on a comparable basis would have been 15.1%. This heavy restructuring charge of course had an impact on the overall personnel cost improvement that we had in 2017. We generate an overall improvement of 100 basis points, among which 70 basis points were due to a reduction in freelance cost, which indicates a better use of our permanent employees. This is totally in line with our expectation from the integration that we expect coming from The Power of One organization.As part of our transformation, we spent some money on key strategic IT projects. This represents 20 basis points in the change in operating margin. We also incurred some new business cost to sustain the effort to restore our growth rate. And as I already indicated, at the end of June, we had an increase in training and seminar costs linked to the need to train our people in the context of our transformation. All in all, our 2017 margin rate at 15.5% is a clear improvement versus 2016 at constant restructuring charge.Moving now to the net financial expense on Page 16. You can see that this chapter is now very simple and we had a reduction of our financial cost by EUR 13 million, with a total interest charge of EUR 61 million, directly resulting from the net debt reduction.Regarding tax on Page 17. Reported income tax charge was EUR 312 million in 2017. It includes a non-recurring EUR 61 million profit, resulting from the recently voted tax reform in the U.S. This EUR 61 million profit was actually the net result of a EUR 139 million charge coming from the toll charge on accumulated reserves by entities partially owned by U.S. subsidiaries, and also a EUR 200 million profit on the revaluation of our net deferred tax liabilities due to the benefit of the lower income tax rate in the U.S.This one-time EUR 61 million profit was excluded from our headline earnings and headline EPS and also from the calculation of the effective tax rate, which reached 27.2% in 2017, versus 29.0% in 2016. Adding back some income tax on amortization of intangibles arising from acquisitions, headline income tax is EUR 391 million. For 2018, we estimate the effective tax rate could be improved on a sustainable basis by 100 basis points to 200 basis points, thanks to the U.S. tax reform.On Page 18, the headline earnings per share fully diluted grew by 0.9% versus 2016 to EUR 4.50. The increase was slightly below the 2% increase in the headline net profit due to the issuance of 4 million shares to shareholders opting for the scrip dividend.On page 19, we are proposing a EUR 2 dividend for 2017, up by 8.1% compared to 2016, leading to a dividend payout of 44.4%, up almost 300 basis point versus 2016. This dividend will be proposed to the AGM of May 30, 2018. As it has been the case for several years, we will offer our shareholders the option for a cash or a scrip dividend.On page 20, this is to show that we have been able to increase our dividend and dividend payout for several years and we should be able to distribute almost 45% of our earnings to our shareholders after approval from the AGM in May 2018.On Page 21. We delivered once again a very solid free cash flow before change in working capital at EUR 1,287, 000,000. Interest rate went down as reflected in the P&L. CapEx were EUR 131 million, as some real estate CapEx projects have been postponed to 2018. With the ongoing transformation that we are implementing, CapEx are likely to be roughly EUR 250 million in 2018, including a non-recurring EUR 70 million amounting to -- relating to a real estate optimization plan that we will detail at the time of our next Investor Day.Regarding the use of cash, on Page 22. The good news is that we are improving our working capital requirement -- change in working capital by -- in 2017, with a cash inflow of [ 61 ] -- EUR 69 million. This is better than expected, as we have been able to mitigate in 2017 the impact of a few media account losses.For acquisitions we only spent EUR 57 million for the full year 2017, in line with our focus on organic growth. The earn-out and buy-out, altogether, represent a cash outflow of EUR 264 million. We bought our own shares to fund our share incentive plan for a total amount of EUR 337 million. As a result, the net debt decreased by EUR 517 million versus the end of December 2016.Let's move now on the balance sheet -- to the balance sheet on the Page 23. Few comments. To start, all the lines were impacted by the change in exchange rate, as U.S. dollar was weaker versus the euro on a year-on-year basis. Our negative working capital shows a decrease, which was due exclusively to the foreign exchange impact, as the U.S. dollar spot rate was lower. The line, net assets held for sales, represent the deconsolidation in the balance sheet of the Chinese agency that we mentioned before.Coming back on the net debt, on Page 24. Average net debt in 2017 was EUR 1,980, 000,000, down 17% year-on-year. Net debt at end of December 2017 was EUR 727 million, down EUR 517 million over the last 12 months, including [ EUR 570 million ] in cash dividends and share buybacks over the period. You will see more detail in our net debt in the appendix on Page 45 to 47.On Page 25, our financial ratios improved as a result of the deleveraging of the group. Our net debt to equity ratio improved from 0.21x to 0.12x, showing a very strong balance sheet. Average net debt to EBITDA was 1.2x in 2017, below our 1.5x objective. And to finish my presentation on Page 26. Our liquidity is slightly above EUR 5 billion at the end of December 2017.So now Arthur will continue with the presentation and afterward, of course, I would be able to -- available to take your questions.
Thank you, Jean-Michel. As I was saying during the introduction, 2017 was not only a year where we delivered financially against our expectation, but we also accelerated our transformation to lead the change in our industries. This attitude towards a disrupted environment has been the trademark of Publicis since ever. It is in the DNA of our companies. Because we are continuously listening to our clients, we have not waited, through the leadership of [indiscernible] for a strategic change. Although this will be the core of our Investor Day in March, let me give you some highlights of what has happened last year.In 2017, we have set a vision that I presented to you in Q2, to become the market leader in marketing and business transformation. We have reorganized the way we go to market, to offer to our clients what they really need -- transformation to win in the digital age. Our end-to-end offer is unique, as we are the only company in the world that is credible at scale with CMOs on one side, CIOs on the other that we can connect. Our clients wants to reinvent the consumer journey to create new engagements. It's about making sure that you take the leadership in term of consumer engagements. They know that to do so they need to transform their business model, thanks to technology. We can do both in a connected way, putting data at the core to always take the right marketing and business decision in this ever-changing world.This new model calls for a new organization and we are implementing it. We are shifting our organization from an holding companies to a platform. First, by putting our clients at the center. We have appointed 35 global client leaders for our top clients with a single P&L, representing 1/3 of our revenue.Second, by breaking the P&L silos at country level in order to make sure that we truly integrate discipline. This is absolutely critical. We have implemented our country model in France, in the U.K., in Italy, in Germany. We expanded it in Asia last week and we have created a unified [ connects ] in the U.S.Third, by unifying and scaling our expertise in data, content, and technology. We have a huge [ advantage there ] and we'll spend a lot of time on this point during the Investor Day, showing new concrete examples through our clients and the kind of value we are delivering.Last but not least, and I hope it will come back in the question, we are putting our people first. We have appointed a Chief Talent Officer and refined the training and development program. We are also building Marcel, a platform that will connect our 80,000 employees, giving them the opportunity to share, learn and create more.As you may have noticed, Microsoft has decided to partner with us in its ambitious journey to redefine the way we work. Satya Nadella, CEO of Microsoft, is personally committed to make Marcel a success. So as you can see, we are building the right organization to serve our client best, to be focused on delivery and be efficient on resource management. This is also a point where we will spend a lot of time in London in a month.Finally, in 2017, the Supervisory Board completed the succession with a renewed [indiscernible]. We have also reinforced our decision making committees. We are appointing during the summer an executive committee and management committees. The management committees on a totally flat organization is responsible for 100% of the P&L of the group, this is how you integrate. You will be able to meet them during the Investor Day and to understand how they are driving the change at Publicis. This is extremely important for [indiscernible]. You need to meet those people, you need to understand the projects we've got and why we are leading the change in the transformation of our industries.More than ever, all the energy of the group is mobilized in executing our strategies. We know that execution is key, this is where this group is spending 100% of its time. I would actually use this opportunity to thank them for the outstanding work they are doing -- they have done this year, obviously with [ their team ].I will also take the occasion to thank Maurice Levy, the Chairman of the Board, not because he is listening, because I know he is listening, but because he is a strong support to deliver those results and the collective dynamic we are creating together is an incredible strength for the present and for the future of Publicis.As I said, although it is too early to draw conclusions on the positive effect of our transformation at this early stage of our journey, it is already leading to encouraging first results. At the moment where our industry is being challenged, we are seeing some very reassuring signs for the new model we are building at Publicis, with many proof of our attractiveness.First on talent. At Publicis we have an amazing team. And here again, you will meet some of them during the Investor Day and I can't wait for that. But at the moment of transformation, it is critical to invest in order to retain, train and also attract the best talent of our industries. On attracting the best talents, 2017 was very impactful. We have appointed 2 major industry leaders as head of our top countries. Agathe Bousquet joined from Havas and she is driving all the group activities in France. Annette King, coming from WPP, will lead the group in the U.K. We are driving the change in our organization, thanks to our new Chief Talent Officer, Emmanuel Andre, who joined from [ America ]. Last but not least, we have appointed a General Manager, Veronique Weill, former CEO of Axa, who is pivotal in making our transformation operational.As you can see, 2017 was a very important year for our attractiveness when it comes to talent and I'm very happy to see that the momentum is actually continuing in 2018 with some of the most breakthrough news of our industries. Nick Law, one of the most inspiring, creative, with a unique ability to [indiscernible] between technology and creativity, which is exactly where we want to be with joint Publicis Groupe. He is coming from R/GA, an IPG agency and will be our Group Chief Creative Officer.The second criteria for our attractiveness is obviously new business. I won't expand too much on it, but I will give you a few examples that illustrate the dynamic we have created with our new offer. On the marketing side, we won new media accounts with Lionsgate or Southwest Airline in the U.S. and what was the pitch of the year in the U.K. with P&G. We have also good momentum with L'Oreal, by winning and expanding our relationship in France. As you can imagine, France matters for us. But also winning from competition in Germany. Creativity remain at the core of Publicis' offers and we have proved it by winning one of the most iconic brand globally, Diesel.But 2017 also showed some great success for our digital business transformation activities. You already know that with Capgemini. We have been appointed by McDonald's to refine all the digital experience of their restaurants. There are also additional success, I won't come back on all of them, like Lloyds or Nationwide. But if I may, I would take some time to go through one of our recent wins, Carrefour.As you know, Carrefour has engaged in an ambitious transformation to strengthen its e-commerce and become truly omnichannel. Carrefour is an historical client of Publicis in marketing and communication. Thanks to the knowledge acquired by our team on consumer and on brand and thanks to the technology and consulting expertise from Publicis.Sapient, we have been chosen by Carrefour not only to change their marketing, but also to transform their business model and implement their omnichannel strategy through the creation of a unique platform. This is a concrete example of the convergence between marketing transformation and digital business transformation, where Publicis Groupe has a unique role to play for our clients.Voila! That's it for 2017 in 35 minutes. We will now meet very soon for the Investor Day. At this occasion, we will present our growth and margin objectives revisited, in the light of the new context of our industries, but also in the light of our transformation and this is why we will need a full day. We will do the same for our strategy and the tools we're implementing to achieve our goal. We will try to be very precise. If you take a step back and look at this last year, mainly events have affected our industry. The media palooza, the ANA report have both undermined the confidence in our sector. Maybe Steve will come back on that. Digital disruption and new consumer behavior have considerable pressure from advertisers. And of course, the profound changes brought by technology and data have radically transformed the way we operate and by the way we will operate.To deal with this relationship and economic turmoil, we have undertaken a restructuring, and even more importantly, strengthened our position in technology, in data and talent to put us in a good position for the future. We are now accelerating and developing our model, and we will explain it during the Investor Day.Why is the objective set in 2013 need to be [ revisited ]. As you all anticipated, [indiscernible], we have 2 pieces of good news that I want to share with you today. The first good news is about growth. We will elaborate on this during the Investor Day, but the reason why we are investing in digital, data and talent is to break away from this sub-growth cycle. As early as 2018, we will be able to post higher growth than 2017. It is an achievement in the current context, in particular, compared to what some of our competitors have been announcing. Also, we expect a positive Q1 with a noticeable swing compared to the previous year, where we reported minus 1.2%, and the same applies for Q2.The second piece of good news is about margin. We have been making significant effort on costs and I want to thank the team for that. Some of the saving made are reinvested and will be reinvested in IT, data and talent. But on the top of those investments, we expect a multi-year improvement of our margin, starting as early as 2018. We will obviously give you much more detail during the Investor Day. So once again, we are giving you a rendezvous in London on the 20th of March.And now, I guess, Anne-Gabrielle, Steve, Jean-Michel and myself are going to take all of your questions. Thank you very much.
[Operator Instructions] We will now take our first question from Annick Maas from Liberum.
I have 3 questions today. My first one is, the P&G suggested that 2017 was a transformative year, given they cut the number of agencies they work with. So I was wondering what were the main learnings for you navigating through this and how could you apply these potentially, if '18 ends up being another tricky year? My second one would be on Sapient, if you can just elaborate on who you compete against for the McDonald's and Carrefour accounts, and also maybe comment on the pipeline for Sapient? And the last one is on the potential large buyback. I think in summer you mentioned that the focus would be on deleveraging, but now given the current share price that might offer an opportunity here for potential buybacks. So if you could comment on that please.
If I understand there are 3 questions; P&G, Sapient and buyback. I was about to distribute the question, but I guess the first 3 ones are going to for me. Steve King is looking at me smiling. So you will wait for next -- you will have one, don't expect anything. Let's start with P&G. First, I want to be very clear here. I will not make any specific comments on specific clients in this kind of call and never, by the way, because these are confidential information. I will make a few remarks anyway. The first is, as I always say, you know, I think that blaming our client for our own difficulty is a serious mistake. And the difficulties that our clients have been facing have been for years and they are actually going through it, some in a very radical way, some in -- a bit slower. But whatever we do, I think it's important to acknowledge that there is nothing new there. And by the way, I think it's becoming very difficult to treat FMCG as one category in term of success or failure. You have some FMCG companies that are moving fast and having extraordinary results already, some that are taking these things very courageously and are making the right change, and some that are in difficulties, but we should not put them all in the same bag. What I will say about P&G, because you give me opportunity, is actually what I think is a nice story, but more importantly, because we want to give you concrete sign of the benefit of our transformation. What has happened in the last 3 years with the media pitch that has happened at P&G, here again, for efficiency and transformation reason. As you might remember, we had a difficult news 2.5 years ago now, where we lost the media pitch of P&G in the U.S. This was a blow, because it was important for us and as you know, P&G is an important client. But we took it as a base for our transformation. It shows to our organization and to the market that if we want to be the most competitive group in the industry, it was time to change, and this is what we did and this is what I just explained. And here again, don't judge me on words, just us on results. And what happened this year is this kind of result that we are looking for. Two years after losing the account in the U.S. we won it in the U.K. in what was the biggest pitch of the year when it comes to media there. Why did we win it? Because we came with the Power of One. We would have not been able to say who was from the media, who was from the digital, who was from the creative, we were working in the interest of the client, building consumer journey and making sure that we transform media into a tool for growth. So here again, when it comes to this point, I won't do any specific comment. I would tell you only one thing. We believe that our model is fit for the challenges of our clients. Sapient, the problem, Annick, is that I can do 3 hours on your question about Sapient, because you are touching the core on of what we are trying to build on, which is a model where we can, at the same time, bring marketing transformation and digital [ business ] transformation, i.e., making sure that we reinvent the consumer journey while getting deeper into the business model of our client to actually make it more efficient, thanks to technology. So what we did for McDonald's or for Carrefour, we are roughly doing the 2 same things. We are a partner in communication. So we help them with our brand, we help them with our data, with the consumer journey. And by the way, I would take one example, which is delivery. We want the creative part of the deliver -- the global delivery of McDonald's and this is what has been our historical business. Where I'd get interesting, now that we're in charge of the digital experience with Capgemini, we're able to link it on an operational level. We're able not only to address to the consumer what he should know about delivery, but also to help McDonald's reinvent the experience, to make sure that they can deliver. The difference between Carrefour and McDonald's is I think, again, a case of McDonald's, we went with Sapient for a very simple reason, is that they were very heavy [ tech part ] in the business that was properly done by Capgemini, and we came there to build the architecture, the consumer experience and being an [ IM ] partner into the journey. When it comes to the pipe, there is actually a lot of opportunities for Sapient for a very simple reason. We are working with most of the important clients in the industry and our ability to go to them and explain them that not only we can help them on the marketing side, but we can help them to transform and actually accelerate growth while extracting cost, thanks to technology, is something that they like. On the last question, I want to be clear on the way we use cash. Our focus has been to return cash to shareholder through dividends. The proposed dividend, as you have seen in Jean-Michel's presentation, is EUR 2 per share, which represents an increase of 8.1% versus last year with a payout ratio that is increasing at 44.4% to be precise. We have continuously increased dividend over the last 6 years and our dividend paid as a multiple has been -- overall paid of [ 1.7x ]. When it comes to share buyback, because it was your question, it would be obviously a subject for the Supervisory Board.
We will now move on to our next question from Marcus Diebel from JP Morgan.
Three questions also from my side. The first question is on your account momentum. I mean, clearly ongoing acceleration in organic revenue growth. Could you tell us what the role of account wins actually played in this context? I mean clearly in Q1, you were quite strong with the account wins of KFC, Miller, and then at [ Louis ]. But then in Q2, Q3 you lost Sprint and [ Ritz, Modern ] and Sanofi. So I'm just trying to find out really, A, what the share of account wins was in your organic revenue growth in the quarter and more importantly, is it fair to assume that you will have a tailwind from account wins, at least for the next 2 quarters? That will be my first question. Second question is then on margins. Clearly you guided for further margin expansion, but could you help us a bit more kind of like squaring the different elements. Clearly you have, hopefully, some operational gearing, you have some cost savings and then most importantly what kind of restructuring charges you envisage for 2018 from the -- from your current point of view? And then the third question, very simple. Could you give us an FX rate impact for 2018, roughly, at current spot? That will be very helpful. Thank you.
Thank you for your question and the good news, I'm going to be able to pass over on the table to make sure that everybody [ can talk ]. I will just -- before I give the word to Steve on the revenue growth and opportunities, one of the big things that will happen in 2018 is that there will be a lot of activities when it comes to media and new business in media. So what I propose is that Steve give you a flavor about what is and will happen when it comes to new business and growth in this category that is going to be at the heart of what we're going to do in term of growth this year.
This is Steve. So if I talk on the media profile, I think as everybody on this call will know, back in 2014 and 2015, we were in the midst of what we called media palooza and this is when we had this sort of unprecedented number of opportunities around the world with clients reviewing their media assignments. It's very clear now that we are entering already in the midst of media palooza 2 and the initial indications indicate that the number of opportunities in media are going to be even greater than we saw in media palooza 1. To the question of momentum in media, like the entirety of this organization, really our new focus started about 2 years ago and that was very much when we created the new media reorganization of Publicis Media, and that was one that we created a new organization, focused around brands, global practices, very much trying to deliver trust and transparency to our clients. From my perspective, one of the reasons that we think have gotten positive momentum is that has a very strong pickup by our clients. And if we look last year, we won some 440 assignments around the world. You've heard earlier on some of the wins, such as P&G which Arthur has already mentioned. But in the U.S. and globally, we've Lowe's, Molson Coors, Lionsgate, Fiat Chrysler, [indiscernible] L'Oreal et cetera. And if the question is about momentum, if you -- on an annual basis last year, we converted some [ EUR 7.5 billion ] of billings. And to your question about momentum, in the last quarter, we actually won EUR 2.2 billion. So there seems to be positive momentum going -- coming out of 2017. And if we look at the opportunities right now, we are anticipating a stronger scale of opportunities in 2018 than 2017 and hence the fact that we are quite optimistic about growth and margin for the group. There's one other point that I would make, which is, although we've talked about -- I'm very much focusing on the media opportunities, many of these now come with connectivity with the rest of the group. We've already mentioned how P&G with so many of these assignments now are coming, because we are bringing in Sapient or digital or data or content or creative from the other parts of the group to build far more connected solutions. That's a trend that we saw in 2017 and I'm sure that's going to continue in 2018.
And by the way, it has been part of our success. If you look at the win we had in '17, I mean the major one like, McDonald's, Carrefour, Southwest Airlines, the fact that we can go with an end-to-end model with the group and further, it is totally seamless, is making the difference, because when you start putting the consumer journey at the center, you can't afford to have silos. And this is why our organization is starting to pay off. I will quickly take the question on margin expansion, because it will give me the opportunity to come back on what Jean-Michel had said on that, because it's an important point for us. With margin increasing in 2017 by 40 basis point at constant restructuring charges, 2017 results really demonstrate our ability to increase margin even in the low growth environment, which is of course an important point. And this has been delivered through the internal transformation that we launched almost 2 years ago and where we are now starting to see the benefit. We have been making significant effort on costs. Strategically, some saving has been reinvested in IT, in data and talent. We can't tell you that we need to transform our industry and not invest on that. But on the top of these investments, to boost our future growth, as I said, we really expect a multi-year improvement of our margin, starting as early as 2018. We'll try to go in detail and give you KPIs when we see you in a month, but this is an important topic for us. As I said, because we need to demonstrate our competitiveness, because we need to increase our margin and because to transform we need to bring the right expertise and talent on board. I think Jean-Michel is going to take the FX impact.
Regarding your question, so we are at the beginning of February, so it is very difficult to make a prediction on what exchange rates could be for the full year 2018. Overall, budget is something that you know -- some of you know. All our budget are then assuming the same FX rates in 2018 on average as they were in 2017. So we budget with the same exchange rate and we are not predicting and introducing new exchange rates. Having said that, I can see that exchange rates have moved significantly for the last 4 months. This is a fact. So please don't take my comment for guidance, but more for sensitivity analysis. Assuming exchange rates, say, for the full year of 2018 at the level where they are today, the impact of FX on 2018 revenue could be negative by EUR 450 million. Again, this is not a guidance, given the volatility.
Okay, perfect. That's helpful. Maybe one very quick follow-up. Is it fair to say that you have basically a tailwind on your organic revenue growth throughout 2018 from account wins and Richmond, Sanofi and Sprint will only hurt financial year '19, is that fair?
Yes. Again, we won't comment on those numbers, because they are going up to a much bigger number. What is important is that we do believe that we have the structure, we have the team, we have the model and by the way, we have a relationship with our clients and a position on the market that should create some tailwinds. And I mean it's -- and we will see how it goes in the coming weeks. But I think that reaffirming that we will deliver growth in '18 and making sure that at the same time we improve our margin is a sign of our confidence in the future, confidence in our model. And this is why -- sorry to insist, I'm doing the ad guy, I hope you will come to the Investor Day, because until you see what we are bringing to our clients, it's difficult to understand the kind of headwind we are creating.
We will move on to our next question from Brian Wieser from Pivotal Research.
I'm hoping you can clarify with respect to the IFRS 15 issue. You say that Q4 2017 organic growth includes the impact of reclassification on a gross basis, but then also say you haven't implemented IFRS until January 1, 2018. So I just want to make sure that I understand if the 2.2% for 4Q '17 is directly comparable to the 1.2% from prior quarter, or would it have been 2.1% if not for IFRS 15? And then a related question, does reclassification impact one region more than another?
Thank you, Brian. I guess I would leave Jean-Michel answer the questions.
So, first of all, IFRS 15, as I said, has not been implemented yet in the numbers that you have seen today, for sure. It is something which is coming for 2018 figures. This is -- we will add to the revenue more than EUR 600 million to the total revenue of the group. This is changing a little bit the profile. But having said that the 2.2% that we are disclosing in 2017 -- Q4 2017 are totally comparable with the 1.2% for the previous quarter and so this is during the year, everything is comparable and consistent quarter-after-quarter.
Okay. And what is the regional impact in the year head?
We can't hear you, sorry.
Can you clarify, will there be any regional disparities between where you'll see an impact? You mentioned there is a scale of difference obviously, but does it -- are the activities which cause a difference in revenue recognition are skewed to one region over another?
These impacts that we have disclosed by -- we were -- the impact that we are disclosing is mostly on Europe.
We will move on to our next question from Lisa Yang from Goldman Sachs.
The first one is on your talking about expansion of your margins in the coming years. Just wondered if you could share what the level of organic growth is required for margin to continue to expand. Clearly you talk a little about reinvestments, so if growth doesn't meet expectations, just wonder if you still want to reinvest, or the priority is really to expand your margin, whatever the growth rate will look like. That's the first one. Second question is on Sapient. I know you don't like breaking out the performance of the individual segments, but given it's really the core of what you're trying to build, I think we really appreciate the comment on the recent [ trends of ] organic growth. Given the recent wins, what's the outlook that you expect for 2018? And the third one is on your comments around Spain and Germany being negative in Q4, just wondering if there is anything market specific, is like TV or any other -- like media being impacted, or it is because you're losing share?
I guess I'm going to take the first question on organic growth versus profits. I will then move on to Sapient and maybe I would ask Steve to say a word about Germany. Let's be clear, we don't want to oppose organic growth and making sure that we are competitive in term of costs. So as I said, what we have started 2 years ago is to make sure that we lower down our cost base, to invest into talent and expertise we need to grow faster, but also to improve our margin. To answer very directly your question, we are, as I said, committed to deliver growth next year and improve our margin. We will do the work on the cost base whatever happens, because we are doing it and we will put the level of investment compared to the growth. So, if we can deliver higher than what we expect, good, but we have set a target that we're thinking at the same time reasonable and ambitious and we will make sure that we adapt with -- one with another, because we're not going to trade. We know that we need a margin expansion, because we want to be more profitable and we will never, at the same time make sure that we deliver growth at the expense of the margin. On Sapient, no, we can't break out, but I can tell you 2 things. First, the fourth quarter was good. And second, when you look at the kind of contract we can get, the kind of wins we're starting to have really show that there is a momentum. And we are extremely pleased with the organization that has been put in place. We are extremely pleased by the integration. Let's be clear, the acquisition of Sapient was a game-changer for us, no doubt. So you can say this or that, but at the end of the day, the winner in this industry will be the one that can convert marketing and business transformation. And this is why you see some of the system integrators paying very expensively smaller agencies to get into that, and they are right, by the way. This is the way for all of us. But coming from the communication [ world ], Sapient was the only company at scale that can transform a group like ours and bring the level of technology we need to be relevant in the next decade with our clients. Now is that an easy journey? Of course not. You mix [ engineer ] and creative. But when you start to do it well, it creates magic. And you start to see this magic in the new business win and [indiscernible]. I guess on Germany, I will pass it to my friend Steve.
Thank you, Arthur. And Lisa, to your question on the geographies, I think at the beginning of the year we did not anticipate that Germany would be as weak as it was. We probably -- if we'd had this conversation a year ago, I'm sure we would have anticipated some weakness in the U.K., post Brexit, but that really didn't come through. And the situation in Germany, as you probably saw during the course of the year, Zenith forecast, we downgraded from 3% growth to 1%, and very much connected to the political uncertainty, the lack of clarity on the coalition, which similarly actually we saw in Spain over the Catalonia dispute. And that definitely had a -- both of those geopolitical uncertainties gave rise to uncertainty by consumers and by our advertisers. And you'll be pleased to know, actually this year, the coming year, we think we'll be stronger in both markets, particularly in Germany, where we think we're going to have some better success in terms of clients, but also we think the economy is going to be far more normalized and less uncertain.
We have a great team in Germany, so we're very confident.
We'll now move on to our next question from Charles Bedouelle from Exane.
So first, Jean-Michel, please apologize for my early comment, the [indiscernible] were not down as much as I've previously written, so please accept that. Now on with my questions, 2 things here really. The first one, you talk about the opportunities coming from media palooza in terms of growth and margin. Last time, the opportunity turned out to be actually a negative one, I think both on margin and revenue. I don't wish you the same. But, are you baking in your guidance for the year, or budget for the year, any net wins from media palooza or the new media palooza? That's my first question. And the second question, I just wanted to come back on the margins, because you say that you invest a lot of the savings into talent and attracting the talent, but when I look at your numbers, it's actually the compensation ratio which is going down over the year and the other cost which is going up as a percentage of revenue. So I just wanted to clarify if I'm missing something here relative to your comments? And the third question, if I may, is you talked about some magic in what you're doing and I wanted to know how magic or how good Q1, Q2 could be, if you give us just a little bit more color that would be very helpful. Thank you very much.
I'll come back to the magic at the end. Thank you, Charles. Steve will give you a word on media palooza. Also this is strictly confidential information, I think that you can read in the press, but we will give you a word. Then our friend Jean-Michel will come back on margin. I'll talk a bit about magic, but I'll talk also about [ bonuses ]. So I guess we'll start with Steve.
Yeah, as I already indicated and as you've heard, we anticipate that media palooza 2 could exceed the previous sort of account reviews, where as we've indicated, perhaps we did not perform as we would have wanted to do. I think we're all much more optimistic about our prospects and certainly if we look at the number of reviews around at the moment, if we compare ourselves to the other major holding companies, we have a smaller percentage of accounts that we're defending compared to our competitors. We also look at our conversion rates last year, which steadily improved during the course of the year. But your specific question, we don't include accounts not won here into our numbers. So one of the things we'll be doing on the 20th of March is we'll be trying to quantify the total potential scale of media palooza 2 and obviously we'll have some more information of where we are in that process.
Okay, Jean-Michel, I guess.
Regarding the margin components. Okay, you're right. So we are improving our ratio of personnel cost. But as I said in my presentation on the source of change, there is a very important reduction of freelance cost, which is totally coming from the benefit of this new organization, The Power of One. We are working on a far more integrated way, which means that people are sharing far more their needs within the company in term of headcount of people to deliver the work and this has led to a good reduction that we have seen coming significantly already in the first part of the year. If you remember what I said at the time of releasing our June numbers, first half numbers, we saw that already. So this is benefited -- direct benefit of our new organization. Of course, we are very pleased with that. Of course, we are also incurring some restructuring cost, where there are people who are leaving. Of course, these are also for some benefit on the rest of the personnel cost ratio. Regarding the other operating charges, we have some costs, which are totally linked again to the transformation that we are implementing. We are developing tools, systems, there are a lot of IT projects which have some cost effect on the P&L. We are training the people, which has also some effect, because this is complex. People have to meet together, there are seminars, which are of course implying costs that of course are totally linked to the transformation process.
Thank you, Jean-Michel. I guess I would come back to the magic. I mean, we believe that magic needs 2 things to happen and make sure that it works for you. First, we need to be credible. And here again, this is what we'll try to demonstrate in a month from now, showing you the value we are bringing to our client, because at the end of the day this is how we will bring extra growth and extra profits. Second is magic needs KPI. We know that we have to do demonstrate through the time that the transformation we're in are the right one and we're working extremely hard on the second point to try to give you KPI, will be financially or strategically that will demonstrate that yes, what we are creating is unique to come back more seriously on the world. What we want to bring is a model that is unique, a model that delivers sustainable value for our clients and we believe that we are in a position to deliver that. Now we need to deliver. When it comes to growth, I mean would it be for Q1, Q2, or for the full year, by the way? We know that GDP growth is expected to be stronger. The truth is clients are not giving us indication that marketing spending will follow. And so we have to be very cautious. This is why at this stage I'm giving -- actually with the lack of visibility, in a way, we can only say that our organic growth in 2018, would it be full year, or in Q1 and Q2, will be better. We believe that it is already a good performance and [indiscernible] the market, when you take into account the market context and what you can read from our peers. It is something -- it is already an achievement and you can make sure that we will try everything we can to accelerate. But at this time, this is the basis which I can give. I want to take a minute on [ bonus ] to come back to your point, and I won't comment the number, but you are right to say, we can't -- obviously we can't expect to lead the market if we don't have the best talent and to get the best talent, you need to make sure that they are rewarded. So I want to be very clear on the [indiscernible]. By the way, our people are listening to this call. Bonuses are extremely important for us, as we want to create and then top our market share. We want people to feel that Publicis is there, and that actually together we're transforming and growing again. So there will be absolutely no compromise for that. Everyone who has delivered will get his bonus and we would never use bonus as an adjustment for margin. I wanted to be clear on that. So it's true that bonus went slightly down in '17 versus '16. But the truth is that is due to a mechanical effect that we can explain you if you have time, but I see that there is a lot of questions. But I'm sorry to come back on that, but it was critical for me. So if you may, we're going to move to the next one, because time is flying. We said that we'll shorter calls and we are already on [ 1 hour and 10 ], so I guess we're going to take the next question.
We'll move on to our next question from Adrien de Saint Hilaire from Bank of America Merrill Lynch.
Sorry to be a bit of doom monger, but I've got a few perhaps tricky questions. The first one is about consultancies. I'm curious to know what is the percentage of pitches where you clash with consultancies, how it has evolved in 2017 versus '16 and what's your hit ratio, let's say, your success rates. Firstly. Then Arthur, you mentioned talent as a way to -- well, as a proof of your attractiveness, but couldn't we say that over the last 18 months there has been a lot of net loss of talents from the industry, the ad agency industry to consultancies, including from Publicis? And then, perhaps from Michel, I'm just curious if your 2018 guidance is based on what we can see today or is it based on the IFRS 15 adjustment, i.e. if you're getting growth acceleration based on [ 0.8 or 0.4 ] and same for EBITDA margin? Thank you very much.
I'll take your point on consultancy first. When our peers, the holding companies are saying that consultancy is not a competition and for us is not part of our market, they're right. We don't need any consultants or system integrator on the communication or media pitch today. We can need them as a consultant, by the way. We can organize the pitch, but they are not participating. And you won't find any significant win anywhere from the consultant or a system integrator when it comes to marketing. As you may have noticed, we have a slight difference with rest of our peers, which is digital business transformation, thanks to Publicis.Sapient. So in the case of Publicis, yes, those consultants and system integrators could be fierce competitors on the other part of our business, on our second leg. And our competitive advantage there is not in size, because most of them are bigger than we are, but who cares. What you care is -- but serving one client. What we bring on the top of technology expertise is our understanding of the brand, our understanding of the data and something that I said at the beginning, which is critical, our relationship with CMOs, because no company tomorrow will transform if you don't connect to chief marketing officer with the CIO in charge of IT. And so our ability to bring both together, in a connected way, with data at the core, make us unique when we fight against those competitors on these specific segments. On talent, sorry to say so, but we haven't lost one talent that we didn't want to lose, not one. And by the way, we have been attracting a lot. I know it's not in your industry, but when you look at the kind of profile we have been attracting in the last year, if you look a bit at the professional press, you will see how impressive it is, which is by the way very reassuring, because it means that we are still in the people business. The arrival of Nick Law in the U.S. has been a shock, because we have demonstrated that our model was truly creative and digital as the company was running before, but at a scale which is obviously totally different. And just for the funny part, I encourage you to look at some brilliant people that have moved to consultancy and that are coming back now very fast to the ad world.[ Audio Gap ]much. Next question please.
No, I have -- I had a question for Adrien that I need to answer. The question on the 2018 guidance, of course has been based on totally comparable basis on what we delivered in 2017, because we are unfortunately not able to speak under IFRS 15 at this stage, because the work is still in progress and we -- our budget has been based on 2017 standards regarding revenues and not IFRS 15. We are planning to move to IFRS 15 at a later stage, but this step is not already done, unfortunately, I would say. The growth objective is against the 0.8% that we posted in 2017, of course.
We'll now move on to our next question from Julien Roch from Barclays.
My first question is on -- Steve, who said that you won EUR 7.5 billion of billings last year. Is that a net number or a gross number, because if it's a net number and you use the usual 2% to 3% billing to revenue conversion, it looks like it's 130 to 190 points of benefit. So that's my first question. The second question is on the reclassification of production contracts, which is not linked to IFRS 15. You told us it was a 40 basis point benefit in 2017, but was there any benefits in 2016 in Q3 or Q4? That is my second question. And then the third question is, what makes you so confident that Q1 will be very positive, maybe indication of January, or you're thinking beyond you being so positive on Q1? Thank you.
Thank you very much. I guess, we're going to start with Steve, then Jean-Michel and I'll take the rest one.
It's very nice of you to suggest that I have won EUR 7.5 billion, unfortunately that wasn't the case. We have many, many thousands of people who've contributed to those successes. [indiscernible] you passed on the comment about bonus. So when we talk about the EUR 7.5 billion, that is the gross number. That is the billing number, which obviously is -- we have different sorts of assignments, it is becoming very difficult to measure. But as you all know, that is a gross number. And we do not provide conversion rates of what that converts to in terms of net revenue.
But then I guess -- when I mean gross versus net, I mean, is that only what you won, or is that what you won plus what you lost?
That is the figure that we won. So also as other people have pointed out, there were obviously losses as well. So similarly, when I talk about the EUR 2.2 billion in Q4, that was the gross number.
Then my question would be, how much did you lose in 2017, so the loss number that is comparable to the EUR 7.5 billion?
Yes, okay. I think the EUR 7.5 billion is the gross number, the EUR 2.2 billion is the gross number. We will need to come back to you and provide some clarity on the net number once you take out the losses.
Yes, regarding the impact of reclassification in 2016, in Q4 -- in Q4, we had some impact, Q4, 2016, have been impacted also which -- but much lower, which explain why we have this reversal in Q4, effect on Q4 2017. So we have an impact in 2016 for sure.
And maybe I'll take briefly the third one, because it's typically the kind of topic will come back. But as I say, we expect Q1 2018 to be positive. And by the way, it will compare with the negative start of the year in 2017 at minus 1.2%. So to be clear, we are committed. It won't be an easy achievement in the context, but when you look at the dynamic we're starting to have, we also said what we'll do, but we are pretty confident that if we can continue to accelerate as we do, obviously, [indiscernible].
So we can move on to our next question from Tom Singlehurst from Citi.
Just two very quick ones. Firstly, you talk about cross-selling as being one of the main pillars of the investment case. I was just wondering whether you can give us, just as a starting point, so we can benchmark you on this, whether you can give us the sort of current or historic overlap between Publicis.Sapient customers and sort of traditional marketing services customers, so we can track how cross-sell is progressing? Second very quick question, growth trends by discipline. I know you weren't comfortable giving us an organic growth figure for Publicis.Sapient, but can you talk about any sort of variance in growth between traditional creative functions and media buying, because I mean as you heard from Adrien's question, I think there are lot of people who are really worked up about pressures on media and it would be great to get a sense of whether you're actually seeing any negative trends in media buying on a pure like for-like basis.
Tom, quick question, quick answer. On cross-selling, this is a great question and we believe this is the kind of KPIs we need to develop, i.e., how many clients from the advertising/media part could be cross-sold with P.S. You are seeing the most significant of it through the wins we're having and the work we're doing, but I don't want to push it back to the Investor Day, but this will be a KPI for sure, is our ability to cross-sell, but more than cross-sell, by the way, because I don't like the word cross-sell. It's about how deep can we go into transformation of our clients, because this is how we will demonstrate that our model is the right one, is when you move from being a provider of communication to truly be a partner in the transformation of our clients. So this is where I hope you will see that we will bring KPIs that we show how we're progressing through time, knowing to be clear that our objective is not to accelerate too fast, is to do it properly, to deliver to our clients and to show the business results and we'll then accelerate. Steve, you want to take the second question, or you want me to take it?
No, I'll take it. I mean when we -- so, Tom, when you asked a question about media buying, certainly the media business was started out of -- that was the original route, but the business now is much more widely dispersed than that. And now obviously we offer planning and strategy and content development and econometrics and analytics and data. So, while certainly the media buying business has changed quite dramatically and the platforms that we use, but I think answering your question in a general perspective, we are seeing greater growth out of the media in totality than the group average.
I guess, we will show you also during the Investor Day the convergence between media and creative. What matters today is to bring one to one communication at scale. And to bring one to one at scale, you need the power of creativity to build and produce different methods, but then you use the data and the media to make sure that it goes in the right way. And this is the power of our group and that at the end of the day, we see when it comes to communication and media, we have done this thing in a way in our key countries where we have killed the P&L silos to make sure that we bring this offer and -- I mean, we'll see how it goes, but there is a series of speech and experience that we're doing at the moment on this model, where I hope -- let's cross fingers, we can share the benefit with you when we see you in 1.5 months.
We'll move on to our last question from Tim Nollen from Macquarie.
Sorry to come back with another couple of, I guess, they are housekeeping questions on the numbers. But Jean-Michel, you noted a note on the 2017 number that you had a restructuring, I think you said of EUR 120 million, and I couldn't catch if you had given a number for 2018 expectation. Secondly, on the tax rate, I think what you're implying is to use an effective tax rate of 25% to 26%. And then on -- back on the IFRS 15, could you please repeat what you had said that it adds in terms of revenues. [indiscernible] EUR 600 million looks like a very good number and if that is a '17 or an '18 number. So those were quick numbers. And then lastly, please. You mentioned I am very surprised [indiscernible], you said that the FMCG sector showed some slight improvement in Q4. I just wonder if there is any further comment you can put on that and if we can get more optimistic on 2018 from that sector?
Okay. I would take the last one and I'll let Jean-Michel --
So the restructuring costs that we are incurring in 2017, so that is a very high number, which is EUR 120 million, but transformation is still not completed and we will incur still a high number of restructuring in 2018 that we have estimated at EUR 100 million in 2018. Regarding the tax rate, yes, we will improve the tax rate next year and the kind of rates that you have indicated in your question is absolutely correct, we'll be between 25% and 26% tax rate and what is important is to get that on the sustainable basis, obviously. So regarding the impact of IFRS 15, as you said, it has been -- more than EUR 600 million is based on 2017 numbers, because we are preparing a comparative for 2018, month by month, which is ongoing. But the EUR 600 million -- more than EUR 600 million additional revenue that by implementing this new statement we will get in the P&L is based on 2017 numbers.
So maybe I'll take the FMCG question to conclude. Yes, we have a slight improvement when it comes to our FMCG client in Q4. But I guess, we can't draw any conclusion on 2018 on that. But what is important that about growth, difficulties and challenges for the FMCG, I will leave you with a thought. Don't ask me to mention any names, but think about all the brands that you have known forever that are beyond FMCG, they won't disappear, they will be there in the years to come. They will go through some difficulties, there will go through some transformation and this is at the core of what we believe. We are a company that has been built through its clients. We became international, thanks to our clients. And now we are transforming, thanks for the transformation we are bringing to our clients. And all of those clients that we have been working for decades when it comes to FMCG, the big topic for us is to make sure that we transform the relationship that we're having today as a communication partner to a transformation partner. And we strongly believe that the day that we'll be able to do that at scale, putting data, content and technology at the core of our relationship, we will bring them the kind of growth and margins they need and we'll finish with this kind of equation. It's not easy, it's going to be a challenge. As I said, it's not about the vision, we are pretty confident that we've the right one. We do believe that in '17 as I said, we delivered what we were expecting and on the same time, we've incredibly accelerated on our transformation. There is still a lot to do, but at the end of the day, I am finishing on your question, we believe that all of those clients will be there, they will transform, sometimes slower, sometime faster, but we'll be the one accompanying them in their transformation. I would thank you now. Here again, last commercial message, come to London, you'll have a good time and I hope you'll have a good experience. And hopefully we'll meet you all on the 20th of March in London. Thank you very much. [Foreign Language]
That will conclude today's conference call. Ladies and gentlemen, thank you for your participation, you may now disconnect.