Ladies and gentlemen, good day and welcome to the third quarter 2022 revenue presentations of Publicis Groupe. For your information, this conference is being recorded. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe.
Thank you, Elise. Bonjour, and welcome to Publicis Groupe 2022 third quarter revenue call. I am Arthur Sadoun, and I'm here in Paris with our CFO, Michel-Alain Proch. Alessandra Girolami is also here and will be available to take all of your questions offline after this session. I will start this call by sharing the main highlights of Q3. Michel-Alain will take us through the detail of our numbers. After that, I will conclude with our outlook. Finally, we will take all of your questions. Before we start, please take the time to read the disclaimer, which is an important legal matter. Let's dive into our presentation. In the context of rising tensions in the global economy, Q3 was another strong quarter this year. We posted +10.3% organic growth ahead of expectations.
Q3 marks the third consecutive quarter of double-digit growth this year after +10.3% in Q2 and +10.5% in Q1. As you know, what matters the most to us is our performance compared to 2019, before the pandemic. This is the one that truly assesses our underlying growth above and beyond the ups and downs of the global economy. Actually, we continue to see real momentum on this basis as we are accelerating in Q3 with +16% organic growth following +12% in Q2 and +10% in Q1 compared to 2019. Our Q3 performance leads us to +10.3% organic growth for the first nine months of the year.
On a reported basis, including Forex and acquisitions, our first nine months net revenue actually exceeded EUR 9 billion, which is 21% higher than the same period last year and 31% higher than in 2019 before the pandemic. Looking at our Q3 numbers in detail, we continue to outperform this quarter, thanks to our unique model, which is fully integrated between data, tech at scale at the heart of our creative and media activities. This was visible in the performance of our activity mix across our regions and in our new business momentum. Let me break that down. First, our strong activity mix. In Q3, we demonstrated again our ability to capture the evolution in client spend toward first-party data, digital media, and business transformation. Publicis Sapient and Epsilon, which together represent 1/3 of our net revenue, were again significantly accretive to the group performance in Q3.
With Q3 organic growth at +18.1%, Publicis Sapient continued to perform strongly in an environment where the demand for digital business transformation, direct-to-consumer capabilities, and commerce solutions remained high. Epsilon saw its performance accelerate to +13.9% organic growth in Q3, with very strong digital media this quarter capturing the rise in demand for targeted ID-based media. In addition to the fast-growing activities of DBT and data, media achieved double-digit organic growth this quarter, mostly fueled by digital. Creative was up mid-single digits, including a very solid performance from production. Second, the strength of our model was visible in the performance of all of our regions. The US, which represents 60% of our business, continued to show very strong dynamic at +11.1% organic growth in Q3.
This represents +20% organic growth versus 2019 and acceleration compared to the first half of the year. As in Q2, Media, Epsilon, and Publicis Sapient were accretive to organic growth while creative, driven by production, grew high single digits. Europe saw its organic growth accelerating to +11.1%, both on the one-year basis and on the three-year basis. This was driven by a very strong performance in the UK, which reported organic growth at +22.6%, almost doubling the rate of H1, thanks to the outstanding activity at Publicis Sapient, combined with double-digit growth in both creative and media. France grew +7.8% organically in the quarter with broadly stable creative and double-digit growth in media. Central and Eastern Europe accelerated to double-digit growth despite the lack of activity in Ukraine.
Asia was at +4.1% organic growth in Q3. While Southeast Asia was broadly stable, China accelerated to +5.9% this quarter despite ongoing lockdowns, as it benefited from new business ramp-up. Third, the strength of our model is also visible as we continue to top new business leagues. After a strong first half, we won the largest budget in review this summer. Of note, we won the biggest pitch after H1 this year by consolidating 80% of Mondelez business and adding Europe to our scope. After winning PepsiCo media in China this April, we won their creative and media in India and added Southeast Asia this summer. Our momentum also continue when it comes to creative, with the win of Standard Chartered Bank globally.
This means that over the last 12 months, we continued to rank first in new business broker report, again, well ahead of the rest of the industry. I will now leave the floor to Michel-Alain before updating you on our outlook.
Thank you, Arthur. Good morning to all of you, and glad to be with you today. I will begin with slide 10, which shows the evolution of the net revenue for the third quarter and first 9 months of 2022. In Q3, the group posted net revenue of EUR 3,237 million, representing an organic growth of 10.3%. With this strong performance, we have posted double-digit growth again this quarter at the same level as Q1 and Q2. Reported net revenue growth was 23.5% in the quarter. Reported growth was 20.6% on 9 months, which is an increase of EUR 1,558 million comprising the following elements. First, the 10.3% organic growth representing EUR 847 million.
Second, Forex was a positive impact of EUR 649 million, out of which EUR 544 million linked to the USD to euro rate. Assuming the USD to euro exchange rate remains at Q3 average level, it would mean a circa EUR 200 million on Q4, leading to a circa EUR 765 million euro positive impact on the group reported top line for the full year. Finally, acquisition net of disposal contributed EUR 62 million to the group revenue. On one hand, this includes net revenue from acquisition for EUR 92 million. The most important contribution being CitrusAd, Boomerang, and BBK, acquired in 2021, and Tremend and Profitero acquired this year. On the other hand, disposal impacted net revenue for circa EUR 30 million, the most important one being obviously the exit of our operation in Russia from April first.
Let's move on to slide 11, which is giving you the dynamics of our Q3 organic and reported growth by region. North America posted another quarter of double-digit expansion with 11% organic growth. Additionally, the impact of Forex was obviously significant, thanks to the USD to euro rate, bringing the region reported growth to circa 30%. Europe also recorded double-digit growth this quarter at 11.1% organically. This was an acceleration compared to Q2, thanks to a very strong performance in the UK. Asia PAC posted 4.1% organic growth, with China accelerating at 5.9% despite ongoing lockdowns and Southeast Asia broadly stable. While Middle East and Africa posted low single-digit organic growth in Q3, Latin America continued to perform very well this quarter with 19.4% organic growth.
Let's dive in more detail on North America on slide 12. As I've just said, our operation in the region saw their performance reach 11% organic growth this quarter. In the US, the group largest country, all activities continue to perform very well. Media posted double-digit growth fueled by strong underlying trends and new business won in the last 18 months, notably in the TMT and food and beverage sectors. Creative activities posted a high single-digit growth fueled by production, which materialized mostly in automotive, financial services, and retail sector. Publicis Sapient accelerated to 20.9% organically as we were able to capture the very dynamic demand in digital business transformation, particularly in the financial services, healthcare, and retail sector. Epsilon grew 13.9% organically, with a particularly strong performance in digital media, driven by strong demand for data-driven marketing and advertising solution.
The automotive division confirmed its recovery in Q3, while data grew double-digit again and tech posted a very solid high single-digit growth. It is worth noting that both Publicis Sapient and Epsilon grew strongly compared to pre-COVID level at circa 40% for Sapient and circa 30% for Epsilon, which compared to 2019, highlighting the structural demand for those capabilities. Let's turn to the performance in Europe on slide 13. As I mentioned earlier, Europe recorded double-digit growth this quarter after 10% in Q3 last year. Excluding outdoor media activities in the drugstore, our activities in the region grew by 12.8%. The UK, which represents 9% of our net revenue, significantly contributed to the growth in the region with an acceleration to 22.6% organic.
This performance included a particularly strong quarter for Publicis Sapient, thanks to the ramp-up of large contracts in financial services and to a lesser extent in retail. Also notable was a double-digit growth both in creative with existing clients and in media, supported by global new business wins. France, which represent 5% of our net revenue, posted a 7.8% growth, excluding outdoor media activities and the drugstore, thanks to a strong performance in media, notably in the automotive sector and at Publicis Sapient. Germany, which represents 3% of our net revenue, posted 2.5% organic growth with a solid media that more than offset softer creative. Publicis Sapient in Germany posted a high single-digit growth on the quarter. Lastly, our operation in Central Eastern Europe accelerated to 13.4% on an organic basis.
Poland, Romania, Hungary, and Turkey all posted double-digit growth. This performance was achieved despite no activity in Ukraine. On slide 14, I will detail our performance in the rest of the world. Asia Pac, which represent 9% of group net revenue in Q3, posted a 4.1% organic growth. China improved sequentially with 5.9% on the quarter compared to 2.7% in Q2, supported by new business ramp-up and despite the strict lockdowns that continue to impact many cities in the country. Southeast Asia was broadly flat with diverse situation. While Philippines and Malaysia posted double-digit growth, India was stable, and Thailand decreased on the quarter due to tough comparables, particularly at Publicis Sapient in the financial sector. Australia and New Zealand both posted very solid growth.
In Middle East and Africa, we posted 1.9% organic growth, driven by media and creative activities that offset a decline in Publicis Sapient on a particularly high comparable base the previous year. Latin America grew 19.4% organically as Brazil posted positive growth fueled by creative and a majority of countries recorded double-digit organic growth, largely driven by media. On slide 15, you will find the group performance by client industry for the first nine months. This is based on an analysis of our main clients representing 92% of our net revenue, and it excludes outdoor media activities and the drugstore. On the first nine months of the year, all of our client industry continued to post very solid trends, with the exception of non-food consumer products that decelerated while remaining positive in Q3. Three main sectors accelerated their growth in Q3.
First, the retail sector, with over 20% growth on 9 months, thanks to new business across different activities. Second, automotive, which grew 9% in Q3 and posted 7% growth on 9 months. Third, food and beverage showed a strong growth at 12% on the first 9 months, particularly thanks to media and data. Two sectors confirmed their H1 trajectory in Q3. Financial services grew 13% in the first 9 months, notably thanks to Publicis Sapient. TMT grew 10% in the first 9 months on a mix of new business and organic growth at existing clients. I move on to slide 16, net financial debt. The group closing net debt reached EUR 919 million at the end of September 2022.
It's an increase of about EUR 843 million compared to the end of December, mainly due to dividend paid in July for EUR 608 million, combined with the cyclical nature of working capital. The average net debt on the last twelve months is EUR 870 million, decreasing by circa EUR 150 million compared to the end of June 2022. When we include the average lease, this represent a leverage of 1.3 times EBITDA, in line with H1, and improving versus 1.7 times a year ago. Should the USD-to-euro remain at the current level, we now expect average net debt for the year to be between EUR 800 million and EUR 900 million. This conclude my financial presentation, and I now give it back to you, Arthur.
Thank you, Michel.
As you have seen, Q3 was another strong quarter this year. Taking into account our 9 months performance at +10.3% organic and a better visibility on Q4, we are in position to upgrade our full year organic growth guidance for the second time this year to circa +8.5% compared to the 6%-7% bracket previously given. More specifically, for Q4, we are obviously adopting a cautious stance as macro conditions like inflation, supply shortages, and the conflict in Ukraine may increasingly affect our clients, particularly in a quarter of adjustments. We also anticipate the robust trends we are experiencing at the moment to continue, thanks to our unique revenue mix.
This is why we are now anticipating Q4 organic growth in the range of 3%-5%, an upgrade from the 0%-4% that we anticipated previously. Given our organic growth performance in 2022, we will deliver a record operating margin coming close to 18% compared to our previous 17.5%-18% guidance. We will also deliver a higher free cash flow at close to EUR 1.6 billion, versus at least EUR 1.5 billion previously. The year ahead is full of uncertainties that we do not underestimate, but thanks to our model, we are ready to face them.
Over the last years, thanks to the acquisition of Epsilon and Publicis Sapient and their integration with our creative and media operation through our country model, we have radically changed our go-to market, consequently our growth path, and ultimately our revenue mix. This enables us today to help our client weather the macroeconomic challenges in the context of inflation, where they need to drive growth while generating efficiencies. We are partnering with them to face the fundamental changes reshaping the marketing landscape. Privacy led identity, new digital media channels, and the shift from paid to owned media, as well as a tougher competitive market. The superiority of our offer has been recognized in Forrester's latest report, where we lead the industry in the most relevant categories from global marketing services, digital experience, media management, to consumer data strategy and activation. We won't stop there.
As we continue to help our client transform through digitalization and personalization, in the next years, we will accelerate on what will shape the future of our business, the new age of commerce. Thanks to data and technology, we know that today every brand experience from a text to a tweet, a TikTok video to a television spot, a store visit to a transaction in the metaverse, everything has the potential to become a commerce experience. At Publicis, our ability to seamlessly combine data, creative, media, and technology make us uniquely positioned to deliver on those commerce experiences and put them at the core of our client transformation journey. This means helping them navigate, develop, and activate commerce in a way that is effective for their business, but also responsible to our society and our planet.
To achieve this strategic ambition, with the board, we have decided to put in place a new generation of leaders. This new management team, called the Directoire+, is composed of Carla Serrano, Dave Penski, Nigel Vaz and Agathe Bousquet. Together, they bring the right alchemy of modern creativity, media, and technology to the Power of One, and have the responsibility with our wider management team of projecting us into the new era of commerce. Voilà. After a third quarter of double-digit growth, we are again upgrading our full-year 2022 guidance and will deliver circa +8.5% organic growth with an operating margin at close to 18% and close to EUR 1.6 billion in free cash flow.
As you can see, despite the current economic environment, we are demonstrating a strong dynamic based on a unique set of capabilities, our platform organization, and the outstanding dedication of our teams. I would like to finish this presentation by thanking our clients for their trust. I would also like to take a moment to sincerely thank our talent for their incredible efforts. In a context where inflation affects their daily lives, we have decided to grant an additional one-week salary to employees who do not have any variable remuneration and who have been with us throughout this past year. This represents 60% of our people. This bonus will be paid in November to support them as we are entering the holiday season. Thank you for listening. Now with Michel-Alain, we'll take all of your questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for question. We will take our first question from Lina. Your line is open. Please go ahead.
Bonjour, Arthur, Michel-Alain. Well, congratulations on the results. Took my breath away this morning. I have three questions, please. Firstly, and apologies in advance for asking, but could we just get a sense of the monthly trajectory or else July, August versus September? Secondly, on Sapient, I think you previously guided for 15% organic growth for the year. Do you expect more now? And also, what is the visibility that you have on the upcoming contracts? And lastly, very predictable question, but 2023, I know it is very early, but perhaps you could comment on how the budgeting is going with your key clients. What are they saying around the marketing investment for next year? And basically what is your interpretation of their appetite? Thank you very much.
I'm sorry we hear you very badly, so we couldn't take all the question. We couldn't. I've got this question about July, August and so the first. Could you repeat the question because it was very difficult to hear you.
Okay. The first one is just on the monthly trajectory. The second one is on Sapient. I believe you previously guided for 15% organic growth for this year. Do you expect more now? And what is the visibility that you have on the upcoming contracts? And the third one was on 2023. I know it's very early, but perhaps you could comment on how the budgeting is going with your key clients, what they're saying around the marketing investment for next year. That was the third question. Thank you.
Thank you very much, Lina. I'm gonna take the second one, and I will leave you the first, Michel-Alain, if it's fine for you. Okay? Yeah. I'll start with Publicis Sapient because, as you have seen, it's an important driver for growth and also a big point for transformation. As you have seen, we have grown by 18.1% organically in Q3, which means that on a nine-month basis we are already at 19%, okay. It's coming ahead of our expectation because there have been a ramp-up in new contract that has been higher than expected. The demand being very strong. What is very interesting is when you look at the three-year basis for Sapient.
In Q3, on the three-year basis, we are roughly at 30%, okay? When we were in the first half at 18, which shows again the acceleration and you know how important it is for us to have a visibility on the three-year stack. To answer directly your question, we are planning for the moment to see a growth over the year that is at 15%. When it comes to 2023, look, it's of course, like every year, way too early in Q3 to give you a guidance and for next year. To be honest, it's even more true today when you look at the macroeconomic tension. There is some point I can tell you which is, we feel that we are very well-armed to face the macro uncertainties that are coming.
First, when you look at the revenue front, we have a balanced mix of activity that is representing 1/3 of our activity in data and tech, and we know that there will be an increased demand on that. Again, when you talk about Publicis Sapient, when you talk about Epsilon, we have 1/3 of our revenue that is growing fast and by the way, nourishing our media and creative operation. When you look at the cost side, our platform organization that is supported by our global delivery center and our shared services have definitely demonstrated their agility. We feel that here, again, we are very well prepared to face any kind of uncertainty. Again, we can't tell you more today. We will definitely in Q4. Again, more color in Q4.
I can take the point on the client, but maybe I'm gonna give it to you and then come back on the client and explain more about the clients.
Yeah, sure. Maybe to answer your question, Lina, about Q3. Coming back on Q3, there are two main points that I would like to underline to explain our overperformance. The first one is that the macroeconomic concerns that, you know, you all anticipated did not impact our clients significantly so far. This materialized in media and creative both performing above our expectations. That is the first point. The second, as Arthur was saying, while we knew that, you know, Publicis Sapient and Epsilon would perform well, they performed even better, notably with Epsilon capturing an even larger share of digital media. In a certain way, in Q3, you know, we had a great alignment of planets with all of our activities coming ahead of our expectations.
Now, in the detail of, and I think it was your precise question, the detail of the trajectory in the quarter, it was actually very solid throughout the quarter with all months growing double digit on a three-year basis.
Again, as we did not understand very well the question, we are going very broad, and hopefully we are touching a lot of points that will come in later. When you look at the overall client behavior, which was also one of your points, honestly, it is pretty well reflected in Q3, although Q3 were already a strong quarter for the reasons Michel-Alain just highlighted. First of all, so far, we haven't seen any material impact of spend reduction coming from our clients. We are seeing so far, of course, we have to be cautious, but this is the case. It's clear that all of our clients today already are dealing with many challenges, and they will continue to deal with those challenges in the future, be it inflation, supply shortages or the war in Ukraine.
It could definitely lead to some cuts in traditional marketing spend. This is not what we have experienced again in Q3, and this is why the regions are performing well, particularly with media and creative, but it could come. What we think and what we are experiencing, by the way, is that our clients, despite the challenges they are facing, and maybe because of the challenges they are facing, won't stop investing in their marketing and business transformation. We feel confident that the strength of our model will help them face those challenges and so represent demand for us.
Very clear. Thank you very much.
Something. Yeah? Yeah. Okay, we're gonna assume we're all good. Hopefully, we hear the question, the second question better, and the sound is working. If not, I'm moving to the other room.
We will take our next questions from Lisa Yang from Goldman Sachs.
Good morning.
Your line is open. Please go ahead.
Hi. Good morning. Thanks for taking my questions and, congratulations again. A few questions. I mean, firstly, on the margin which you raised, slightly to 18%, could you clarify what's the headwind from the additional bonus you're now giving, and what's driving, I guess, the payment of that additional bonus? Also how much impact from FX you're baking into this guidance because obviously there was a 40 basis points benefit in H1. What are you expecting for the full year now, and is that in the 18% guidance? That's the first question.
The second one is obviously on Q4, your guidance is 3%-5%, which obviously implies on the three-year stack, you know, a sharp deceleration from 8%-10% on the three-year stack versus 16% in Q3. I understand it, you know, it brings it more in line with maybe Q1, but then the question is, was there any one-off in Q3 which explain obviously the big acceleration to 16%? Then you expect basically normalization back to normalized trends of 10% in Q4, or anything else that, you know, you can tell us on that slowdown in Q4? Are you seeing that already? The third question is actually two small questions on just U.K. Why was it so strong at 23%?
Was there any one-off in there? If it's mainly driven by Sapient, is that sustainable into Q4 as well? Similarly on China, that was also very strong despite the lockdown. Should we also expect Q4 to be positive and what's driving that? Thank you.
Thank you very much. I propose we start with the margin, and then I will take the Q3, Q4 question on UK and China.
Yeah, sure. Hi, Lisa. In terms of margin, the exceptional bonus we are granting is representing about EUR 55 million, which represents 40 basis points that we are investing in our talents. Maybe let me give you a bit the overall bridge of margin if you wish. We've got this minus 40 basis points, okay, which is financed by the operating leverage of the group. We are upgrading our guidance in terms of revenue, moving to from 6 to 7 to 8.5. If you take the mid part of the bracket, it's about EUR 225 million additional revenue.
While calculating the operating leverage of the group, this materializes in about 45 basis points of additional margin. It is this 45 basis points that we are investing into this one-week exceptional bonus that Arthur just talked about. Just to be complete, the USD to euro staying at parity for the rest of the year will deliver another 10 basis points, positive 10 basis points into the margin. Plus 45, plus 10, minus 40. It's a circa +15 net net that is flowing down to our bottom line and which accounts for our margin guidance at close to 18%. Back to you, Arthur.
Thank you, Michel-Alain. The Q3, Q4 question. Let me just come back on what Michel-Alain said about Q3 first. It was Q3, a particularly strong quarter where all the planets were aligned. If I want again to cut a long story short, on one side, all the macroeconomic difficulties that were anticipated by the market has not been reflected in our number, and this has a massive impact on our media and creative business. That stood very strong. Second, we were anticipating good growth at Epsilon and Sapient, but we have seen a level of growth that was superior. Again, we went through a quarter where all the planets were aligned, and this is why it was so strong. This is why, by the way, we don't consider that there is a slowdown in Q4.
Now, to give you more color on Q4, because this is a very important question, and to tell you how we are anticipating and guiding for Q4. First of all, and this is very reassuring, is that we believe that the robust trends of our underlying business will continue this quarter. From what we see at the moment, the model we have in place do answer exactly what our clients need, and we will see and continue to see those robust trends. Now, we have definitely factor in some cautiousness because we all know that the last quarter of the year is a quarter of adjustments. By definition, when you look at all the macroeconomic uncertainties that our clients are facing, they might have to adapt their budget in the last months of the year.
We feel that the dynamic is still very strong, but we have to be cautious in the context of, you know, macroeconomic uncertainty and more importantly, in a quarter of adjustments. To be clear, with what we have announced today, we believe that we should be very close to 5%, which mean, coming back to your question, that we will deliver on a three-year basis still double digit organic growth, which is what you have seen in the first semester. Again, a particularly strong Q3, a year on a three-year stack that should be double digit and again, you can see quarter by quarter how this is being effective with, again, good news that we are sharing with you and with our people, by the way, in Q3.
When it comes to UK, first of all, it's important to note that there is no one-off in the UK result. It grew by 22.6% organically in Q3, and it has actually almost doubling the rate compared to Q2. This is mainly driven by the performance of Publicis Sapient that has been extremely strong and that, by the way, represent in the UK one-third of our revenue, which again, makes us also confident for Q4. I don't know if you remember because we had this discussion already in the last year and even the year before, where there have been a slowdown with Publicis Sapient in the UK. We always told you not to worry because it was clients actually reducing their spend, not client going somewhere else.
It was a question of CapEx at a time where cash was difficult for them. The truth is, now that things are back on track for them, first, we are seeing an expansion in the financial services. Second, we are seeing a significant ramp up when it comes to new business win, notably in retail. Again, we feel very good about the UK. It's important to note at this stage that creative and media also posted solid results. We believe that the dynamic we are seeing through Sapient in the UK will definitely continue to be accretive in Q4.
It's funny is maybe not the word, but it's interesting that to touch on UK and China, because if you remember, we said the same for China in a way, which is, at one point our growth was a bit slow in China. It was very strong in the region, but a bit slower. We told you not to worry because the new business pipeline was very strong. We are very confident with the team we have, and we knew they will very well perform, and I think outperform the market. When you take into consideration the lockdown that is happening there, this is a +5.9%, a very good performance. It is a tailwind coming from new business, our ability to help our client transform.
Again, we feel confident about what is being done in China and overall in Asia. As I commented earlier, the new business momentum we're having in the region, particularly starting from Singapore with some global accounts won in the region, is making a huge difference.
Very clear. Thank you.
We will take our next questions from Omar Sheikh from Morgan Stanley. Your line is open. Please go ahead.
Thanks very much, and good morning, everyone. So I've got three questions as well. Maybe to start with creative and media, you've given a few data points during the call about how your creative media business is doing. Maybe if you could just wrap up how across the group the performance was in Q3, and just remind us of what proportion of the total group revenues come from those two elements. That's the first question. Secondly, Arthur, you've referred a couple times about, you know, the fourth quarter being a quarter of adjustments. Could you maybe just tell us how much kind of project work or sort of, you know, short-term cancelable contracts you have during Q4? Maybe benchmark against what you did perhaps this time last year.
Finally on Sapient, maybe going back to one of the earlier questions about visibility on Sapient.
Sorry, I couldn't hear the last question, Omar. The line is very bad.
Michel.
We have lost Omar or we have lost everyone? We have lost Omar.
We will take our next question from Sarah Simon from Berenberg Bank.
Yes, hi.
Please go ahead.
Yes. Good morning. I've got only two questions. First one was on the new business table that you showed. Can you give us a guess as to how much of that has actually affected your performance year to date? 'Cause obviously there's quite a lag between winning contracts. So I'm wondering how much of that you think has benefited you this year, as opposed to how much of it is actually a tailwind into next year. And the second one is on production. You've highlighted this a couple of times in the last few quarters. How much of your creative business is production? And can you give us an idea of the kind of growth that you're seeing specifically in production as opposed to the more kind of traditional part of creative? Thanks.
Thank you, Sarah. I'm gonna let Michel give you a flavor about the number, and then I'll make some comment on that, but on the two questions.
Yeah. Okay. Sure. On the contribution from the new business, as Arthur has underlined it several times, 2021 was a historically busy year for the new business. We emerged as a strong winner leading the industry by far, and you saw in the last new business table that it continues for the first 9 months of 2022. When we look at this, we think that new business represent 2%-3% of our growth this year with a faster than expected ramp-up in the first 9 months of this year.
We told you in H1, and I just want to repeat the fact that we'll continue to be very selective in the opportunities we pursue, focusing on integrating the business we want and continuing to provide the best service to our existing clients. That was for the new business.
Maybe I'll add one comment on new business.
Sure, please.
Which, of course, and thank you for the question. The organic growth that new business deliver is important for us, and it's contributing to our overall goals. What is even more important, and this is something that we are trying to do step-by-step, is to demonstrate how different is our model from competition. I think today you have two KPIs to look at that. The first is our growth in areas like data and technology with Sapient and Epsilon that we have at scale, 1/3 of our revenue. Hopefully, this give you a flavor of where the growth is for us in the future and more importantly, the kind of transformation we can bring to our clients. Second, our ability to differentiate from our competitors in our go-to-market when it comes to new business.
This is a very important point for me because when you sit in a room for two or three hours showing to a client what you can deliver to him versus competition, this is where you can express how competitive, differentiating, and really creating value our offer is for our clients. I think that this new business record is of course to take for what it brings in terms of organic growth, but also for what it shows in terms of differentiation of our offer. Michel, production.
Sure. Yeah. On production, you're right. Since the beginning of the year, we have experienced very strong growth at production, depending on the quarter, above 20%. It's growing from a relatively small base compared to our competitors. It's representing about 5%-6% of our total revenue, but as I was telling you, strongly growing throughout the quarter. Arthur.
Yes. It's small when you compare to our overall revenue. It is bigger when you include it, of course, into our creative business.
Absolutely.
This is a very important point because we don't want to leave you with the impression that what counts for us in terms of organic growth is only Publicis Sapient and Epsilon. We have very strong growth in media, thanks to the new digital channel we are inventing every day. Advanced TV, for example, and our ability to help our clients with an offer that is called Lift is a source of growth for us and value for our clients. What we are doing in retail media with CitrusAd that is actually growing triple-digit at the moment is another example. New business is the third. We continue to grow media pretty significantly. When it comes to creative, I mean, let's be clear, I don't think creative will be accretive to our overall goals.
We do think there is a potential for growth, because thanks to production, when you bring together ideation and production, you have a positive model, which is exactly what our client wants. Because honestly, they want less idea, but that they can express in more channels, which mean that they need more assets at a cheaper price, deliver faster, but with good quality. This is an area where we can help a lot. Again, we have defined clear path for growth, of course, for our Publicis Sapient offer on Epsilon, but we also know that our creative and media business need to continue to grow. By the way, helped by Sapient and Epsilon because sorry to spend time on that, but this is a very important question, the one you raise. Production today is dynamic. Production is based on data.
You would see what we're able to put together in terms of platform between our production capabilities and Epsilon to deliver content in a personalized way at scale. This is part of our future and part of our future growth.
That's great. Thanks very much.
Omar is back.
We will take our next questions from Julien Roch from Barclays. Your line is open.
Oui.
Please go ahead.
Oui, bonjour. Bonjour, Michel-Alain, c'est Julien Roch. Félicitations sur le résultat. three questions. The first one is on visibility. Historically, you had organic for the month, a week after the end of the month. Is that still the case, or do you have weekly sales for the majority of Publicis? And how many weeks of visibility do you have? A question in two parts. The second question is on the budget adjustment. You mentioned several times that, you know, it was a quarter of adjustment that you were prudent. If we go back, say, over the last 15 years, what is usually the adjustment amount in Q4? Omnicom talks about $200 million-$400 million. What is it for Publicis?
That's my second question. Then going back on page five on my slides, which might be page six or four for you, 'cause Michel-Alain Proch was 1 page difference. It's the split where you say Sapient and Epsilon is a third of the business. Can we have the split between Sapient and Epsilon? How much is media of net sales over the first 9 months, and how much was creative? Four numbers. Thank you.
I take quickly the budget adjustment question, and I'll let the two other for you, Michel-Alain. Q4 is definitely an adjustment quarter, and we have seen in positive and in negative over the year. I won't be able to give you a precise number because it definitely depends from one year to another, and we have seen some huge variation, positive or negative, no variation at all in other cases. What is clear is that, we are really in a quarter where our client will be facing a lot of macroeconomic uncertainty, and if there is a quarter where we need to be cautious, it's definitely this one because of possible adjustments.
Having said that, this is what I was saying about Q4, today, with what we have in hand, and it comes back to the visibility question that Michel-Alain will answer, we believe that we are close to the 5%. The reason why we are giving this bracket is that, as you know, 12 million can make a difference, and so we have to be cautious. What we can tell you now, which I think it's very important in an uncertain time, is that we have the certainty to deliver between 3% and 5%, whatever the macro and whatever happens before the end of the year.
Yeah, Julien, it's Michel-Alain Proch. On visibility, we have improved visibility. I think in the last two years for several reason. One, which is derived from the mix of our business. The more we have revenue growth of Sapient, the more we have Epsilon, the better visibility we have, obviously. We have more visibility in this part of the house than on creative. The second, I would say, would be by the very close integration with our operations in the reviewing of business in two parts.
One, obviously on the growth that you are mentioning, but even more importantly with advanced indicators like the pipe that we are reviewing with all operations on a monthly basis. The weighting on the pipe, meaning where are we on our new business? How much are we defending? How much are we offensive on? All of this is giving us a strong visibility. Pretty much the same answer I made you at the end of H1 as Arthur explained, with the particularity for Q4 that it can be an adjustment quarter.
What Michel-Alain won't tell you because he's pretty shy is that in the last two years, he has brought to Publicis a lot of rigor and business acumen when it comes to projection, visibility, and the investment that goes in front. This is why, again, despite the economic uncertainty that we are all facing, we strongly feel that the number we are giving you will be delivered in any circumstances.
As far as the split that you were asking for, Julien, I think the best way to look at it is like when you do a cake. It's one-third, one-third, one-third. It's one-third data and business transformation with Epsilon and Sapient, with Sapient being a bit larger than Epsilon. One-third media, including digital media, and one-third creative and production, and we commented already, Arthur commented about the dynamics of production within creative.
Okay. All right. Thank you very much. Very clear.
If I can insist on that one second because, this is what our client wants. I think that coming back to the question I had on new business is, it's very important that what our client need in this period is personalization at scale, is acceleration of their commerce activity, and our ability to be equally weighted between data, creative, media, and technology, and being able to integrate it as we do at a country level is what is making the difference today and what make us unique, not only in the traditional marketplace where you see us, which is the holding company world, but also among the system integrator.
One of the reasons why Sapient is doing so well at the moment is because they have this, as we call, supplément d'âme, this little thing more than others, which means that they not only come as consultants with strong engineering capabilities, but with a strategic and creative view that makes a difference in terms of customer experience. I could say the same for Epsilon, by the way. I think it's very important to understand that all of this is interconnected, and we don't have two growth engines on one side and the other that is more traditional business. We have truly transformed all of our activities to connect it properly with scales that are equally weighted, which is of course a big differentiator compared to our competition.
Merci.
Merci beaucoup.
We will take our next question from Adrien de Saint Hilaire from Bank of America. Your line is open. Please go ahead.
Thank you very much. I've got a few questions, please. Same here, congratulations on these numbers. First of all, trying to reconcile the comment you made about Sapient UK being very strong, but the fact that Sapient International ex-US seems to have slowed down between Q2 and Q3. Maybe my math is wrong, but it seems like Sapient International slowed down between Q2 and Q3, and that seems to contrast with the comment you made about the UK. Secondly, I know it's a very small part of the business, but I'm just wondering why is Drugstore and outdoor a drag on growth in France and in Europe and overall for the group. I would rather think that as a boost given the reopening trends.
The last question is, the one week bonus that you're giving for this year, is that a one-off for 2022? How should we think about margin for 2023 then? Because I think, Michel-Alain, you mentioned before that, you know, margins would be stable if top line is flat next year. Is there a case now that, you know, that 40 basis points comes off next year and therefore, you know, margins could even grow if top line is flat? Thank you very much.
Thank you very much. I've got to go fast on Drugstore and outdoor. I won't spend that much time on Drugstore. It's, you know, it's a restaurant and some commercial activities we're having on the Champs-Élysées that have been through ups and downs due to the commercial activity in this place. By the way, it's very small and not really material for us, although it's very close to our heart and very important because this is where we go and have dinner when we work long nights, so we like this place. On the outdoor, it's the ups and downs of the activity you're seeing at the moment. Again, it doesn't have an impact, but we are being very transparent on how, and it's no more than that.
Again, it's not very material when you put it at a group level. I'm gonna let Michel-Alain talk about the margin and Sapient. I will just make one point about the one week bonuses. It's a big question mark for us because of course it is having an impact on our margin. We thought it was the right moment to reward all of our people for the performance we're having. Half of them are gonna be rewarded through our bonus scheme that will come after Q4, and we will definitely again have a record high bonus pool for them. We thought that the ones that are not entitled to a variable remuneration deserved it once again to be rewarded for the performance.
This is actually for them, the second time in the year where we are giving them one week salary, and we believe it is a very important gesture, of course, because they have to face some difficulty and we have to be there for them. Also because at the end of the day, yes, we are very advanced when it comes to capabilities, but our most precious asset is our people. The reason why we are delivering what we are delivering is that I believe we have built a unique culture, by the way, that is supported by our platform, Marcel. This was a very important point for us. Now maybe I'll let you take the question on margin and on Sapient.
Yeah. I begin with Sapient. You're right, Adrien, the overall performance of Sapient internationally is a bit below the one in the U.S. We have here. Despite indeed the very strong growth in the U.K., we had actually two declines, one in Asia and one in Middle East, both due to very high comparable base. Maybe you remember as far as Asia is concerned, that Q3 2021 last year was the first quarter of ramp up of this large contract we have with a bank in Asia, in Thailand, to be precise. Compared to this, we had a negative.
That's the reason for the performance of Publicis Sapient being a bit below. In both cases, the dynamics is there and it is just a blip, I would say, in the growth trajectory.
I cannot comment on that because three years exactly at the same time we announced that we will reposition Publicis Sapient.
Yeah.
That was at the time declining, by the way, declining in the US. Since then, under the leadership of Nigel Vaz and with an outstanding team, not only we have totally reshaped the model through industry practices, brought great talent on board, won a lot of clients, but deliver our growth on the three-year stack. As I said, that is pretty impressive. I think that what is important to note about Sapient is that it is really a globally run business. As the demand is strong for digital business transformation, the question is how do we allocate resources to deliver the kind of growth that you're seeing at a global level. It's of course important for us to report on a country basis for you to see where we are performing.
We are talking about big contract that could have a big impact on the organic growth, as you can see in the UK or as you could have seen last year on the Middle East. I think it's important to have an overall view or global view, or at least a U.S. versus international. At least this is how we see Sapient. We see Sapient as a global offer that is delivered through our country model, but what matters the most for us is how do we allocate resources, and you know that this is an industry that is very competitive when it comes to talent. How do we allocate resources to the right project at the right time to overall deliver the growth we are delivering?
More and more the margin? Yeah, maybe Adrian, would you mind just repeat your question about the margin? Yeah. Cause I'm not sure I got it. Yeah, sure. Of course. Very sorry to be cynical, talk about margin for the next year. I think previously you said that, you know, margins could hold flat if top line is flat, if I recall correctly, correct me if that's wrong. Now that you've got this 40 basis points of buffer, even maybe more, given what Arthur mentioned. Might we see like margins even go up if top line is flat or is that the wrong way to think about it? Yeah, I think so. Let me confirm what you heard at the previous call, you're right.
I mean, with a flat revenue trajectory, we are confident in having a flat margin. That's for sure. The second point is basically the way I look at, you know, the way to look at our 2022 performance is we had an outperformance, which is above our own expectation in terms of revenue, in terms of operating leverage drives into about 40 basis points more in the margin, and we decided to invest this 40 basis points into our talent to share our success. It was a +40 basis points -40 basis points. We'll obviously with a flat revenue, you don't have the +40 basis points, that's basically it. Yeah. Okay. Thank you. I think we're gonna take a last question.
Elise, if you have a last one.
We will take the next question from Thomas Singlehurst, from Citi. Your line is open. Please go ahead.
Thank you. It's Tom here from Citi. Thanks for doing the presentation. A couple of questions, if it's okay. Actually, maybe three. First one, over the last few quarters, I've begun to hear ad agencies talk about pricing power, which I don't think in the fifteen or so years or twenty years of looking at these companies, I've never really heard that before. I take it to mean that you're able to pass on wage inflation to a degree to your customers. I was just wondering whether you can give us an indication of how significant the pricing power effect is or how much of the revenue growth in the quarter is a function of you being able to pass on sort of higher costs. That's the first question.
The second question, you mentioned it in passing. I think you said CitrusAd was growing triple-digit. I was just wondering whether you could talk more broadly about your platform businesses. I don't think they're included in organic growth, yet, but if you could comment on, you know, A, how transformative they are to the offering, and then B, when they will be incorporated in organic, that would be great. Maybe that's lesser CitrusAd issue and more Profitero issue. Final question, there's lots of detail in the deck on the debt. I just wanted 100% confirmed that effectively all the debt is fixed rate, rather than floating. Thank you.
Maybe we're gonna start with the pricing power and the debt, and I will finish with CitrusAd since it's the last question. Maybe Tom, Michel speaking. We told you in July and the impact of inflation in the first semester on our top line, we qualified it as marginal. We believe it is still very limited in the second semester as most of price discussion with our clients, and particularly our media clients, are taking place between now pretty much and the end of the year. Of course, we try to share this inflation when possible with our clients. Don't forget that our priority remains to absorb inflation through the efficiency of our operation.
As you've seen in our operating margin, we've been successful in doing so. Inflation, pricing power. Yes. That's what I just. Okay. I will wrap up with CitrusAd, maybe, as it is the last question, and we haven't forgotten anything I see here. No, I can do the debt. Do the debt first. Yeah, I do the debt. Then I wrap up with you. If it's okay with you. Yes. Yeah. To confirm, we have a gross debt of EUR 3.9 billion, which is entirely at fixed rate because these are euro bonds. Basically we've got five.
I don't want to go in too much detail, but there are 5 euro bonds, 2 that are in euro and 3 that we have swapped in dollar, but all of them are at fixed rate. The actual increase in interest rates do not affect our financial expenses. In the other way around, we have a gross cash of about EUR 3 billion, out of which $1.8 billion is in USD, on which obviously we are receiving right now a better remuneration than the one we were receiving at the beginning of the year. Overall for us, a financial situation which is positive. Thank you. We have missed one question, but we'll take it offline and hopefully we have answered the point. Tom, thank you for this last question.
The point you raise about retail media is maybe a question that can be taken with a broader perspective. To answer clearly, your point first.
We have started to count organic growth for Citrus on the first of September. I wanna be clear that the number is not material in the sense that it won't have an impact that is so big on our overall number. Having said that, it's very encouraging to see the growth level and more importantly, and that's the point I wanna make, the impact it's having on our overall business when it comes to our offer. Hopefully what you have seen in the last years is that we have really shifted from being a communication partner to our client to truly be at the core of their transformation. We have done that by repositioning Sapient, and we talked about that.
We have done that by acquiring Epsilon, which was a big move at the time, and the integration went well and fast. Today we are delivering a level of growth that is way beyond what we expected when we bought it. We did that by creating the country model that was difficult to put in place, that has an impact at one point of organic growth because we definitely changed the way we're operating. We did that by developing many platform like Marcel, like our global delivery, that again make us confident in our ability to deliver the margin whatever is the economic situation. What is important to see about CitrusAd is this is again going into the same way like we're doing with Profitero, like we're doing with any acquisition or any platform that we're developing.
We believe that if we continue to be at the heart of our client transformation through data, technology, creative and media being connected, we will be able to still be relevant and still be there when our client need it the most, which is when they're facing those challenges. Of course, we are very clear that the macroeconomic context is getting tougher. This is why we are being cautious in a quarter of adjustment like Q4. We are trying to find the right balance between, giving you some very solid number that shows the kind of model we are building quarter after quarter and continuing to invest in area that will deliver our future growth.
It could be retail media, which is an area where we know that by 2025 all of our FMCG clients will actually spend more on retail media than they are on linear TV. Or it can be through production that can look like old-age capabilities for agency, but actually is something very modern because now thanks to data it could be dynamic. Hopefully you are seeing the ambition we're having at the moment. We feel good about a quarter where all the planets were aligned, which was Q3. We strongly believe that we will deliver on the guidance we have given for Q4 despite all the macroeconomic context.
We will continue to execute that strategy in order to make sure that on the long run we have some expertise that are truly accretive to our growth and can deliver sustainable, profitable organic growth for the future. I thank you very much for your time. We will take all the question offline now with Alessandra and speak very soon. Thank you. Merci beaucoup.
Merci. Bye-bye.