Earnings Call: H2 2016

Feb 9, 2017

Good day, and welcome to the Publicis Groupe Q4 Revenue and Full Year 2016 results call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Maurice Lévy, Chairman and CEO of Publicis Groupe. Please go ahead. Bonjour. Thank you. Thank you for joining us today for our full year 2016 earning call. It is my pleasure to welcome you with Jean-Michel Étienne and Jean-Michel Bonamy. We'll be happy to answer all your question after the presentation. I understand that you want to make it short, so we will go as fast as we can. One word on macro event. 2016 was an incredible journey. It was a year of surprises. The U.K. referendum with now a clear and hard Brexit, the Italian referendum resulting in another exit, which is that of Renzi. It is a Rexit. The election of Donald Trump, for which we don't know exactly what will happen in term of policies and the various decision that are going to be made as executive orders by the White House. We have seen also the comeback of Vladimir Putin, as well as that of China. This is just to name a few. These events will result in geopolitical changes with the economic consequences that no one today can yet measure or foresee. We can expect that 2017 will be a period of uncertainty, particularly if we add to this the French and the German elections. If we move to the new world of technology, we see that technology, digital innovation have had some very strong disruption on society, on the way consumers are behaving, and also on business. We believe that we are just at the beginning of the fourth industrial revolution, which will probably lead to the transformation of a lot of businesses if we rely on what CEOs are telling us. Now, closer to us. After Mediapalooza in 2015 and beginning of 2016, we have been confronted with the ANA report, the development of ad blockers, and digital fraud on ads. These are very serious issues that dampen trust between agencies, advertisers. We are pleased to report that out of 23 audits which have been commissioned by our client, 22 have been already closed with the full satisfaction of our client, and I want to make clear that we had no settlement with any of our client. One topic which I believe is probably the most important for the future is the change in behavior of consumers and how marketing evolves under the influence of technology. Publicis has taken steps as soon as April 2015, creating a whole new approach, which we call the Power of One, a client-centric organization with solution hubs specialized by discipline, creative, media, digital health, and Publicis One for the small countries. The group has transformed its way of working, shifting from an advertising holding company to a connecting company. One company with client at the core. This is a trend that most of our client has also, which is to shift to one company. 2016. 2016 was a year of the implementation of that new organization. Hundreds of executive have changed roles, have changed the way they work, the responsibility they had, and have participated in inventing a new form of collaboration with no silo and no solo. 2016 has therefore been a year of great achievement. Our organization is now in place. Our teams are working hard, and the concept of the Power of One is well-received. In 2016, we delivered against our promises as we increased our financial indicators despite low growth. We will come back to this. Succession was announced as planned and as unbelievable as it can possibly be to some observers, we have put in place a very good succession plan with a great leader and a great management team. I am going to give you the detail on our full 2016 numbers with Jean-Michel, who will cover the financial aspect. On page 2, as you know and as usual, our presentation is on our website, and you can move on and click, and you will see. The disclaimer that I have been showing since a minute is something that you have to read. I leave it to you. Key highlights. We have, as I said, delivered against our commitment or announcement. We announced in 2016 that we will increase all our financial indicators in absolute value. I am pleased to report that despite a weak organic growth, and I will never insist enough on the fact that it is weak, we increased revenue, operating margin, both in value term and as a percentage of revenue, headline diluted EPS and dividend, both in absolute value as well as in term of payout ratio. If you see the numbers and you take a minute of thinking about what we are doing, you can say that our business model is probably the most robust of the industry. The numbers speak loud and clear. Revenue EUR 9.7 billion, up 3.3%, EBITDA EUR 1.7 billion, which is 17% of revenue. Very solid operating margin, up by 10 basis points, and the best year ever for free cash flow generation. We will propose a dividend at the next AGM of EUR 1.85, which mean up by 15.6% year on year. We have taken a non-cash goodwill impairment. Both Jean-Michel and myself will come back in slightly more detail on this in a few minutes. Something which is extremely important is to see that the Power of One is not only working, but it is working extremely well. It is a successful new approach for a new era. New organization, end-to-end offering to meet clients' new needs. Positive account winning momentum. You will see that. These are the proof that it is working, and we believe that we have attractive perspectives. Regarding management succession, we will come back to this a bit later. If we spend one minute on the numbers, as indicated, the only weakness that we have in all the numbers is our organic growth. This for the reason we know, and we will come back to this as we move on the presentation. This is something which has hampered the whole numbers, but when you look that with 0.7% organic growth, we are able to deliver an operating margin of EUR 1.5 billion, up by 2%, and that we are increasing our margin by 10 basis points, it shows that we have a very robust business model. I have given already most of the numbers. I do not believe that it is worth insisting on the free cash flow, EUR 1,261,000,000, which is the highest number ever in our history, up by 14.9%. We have, by the same token, reduced our net debt to EUR 1.2 billion. On page nine, we have the numbers regarding Q4 revenue as well as full-year revenue. Q4 was not a good quarter. We have always said that volatility is high in Q4. This year not only we had the impact of account losses in 2015 and the first half of 2016, but on top, we have very little one-offs and many budget cuts, which happened. Additionally, comparison was unfavorable as we had a very strong Q4 in 2015, and this has led to a low organic growth at 0.7% for the full year. On Q4, we have a negative organic growth of 2.5%. It is unfavorable comp. We are on page nine. It is unusual negative Q4 volatility with a quarter which has been not as good as what we had. If we look now at the full year, when you add the account losses that we have already mentioned for 2015 and the first half of 2016, you look also at the weak performance of Razorfish, it does represent in total 320 basis points, which have impacted negatively 2016. I am not going to say, "Okay, if we had not gotten these issues, we would have delivered close to 400 basis points of growth." I am just saying that we had to face those issues. Without dwelling on those numbers, we can say at least one thing, which I believe is very clear, that our underlying business is extremely solid. If we look now at the revenue by geography for 2016 versus 2015, what do we see in term of organic growth? This is something which I believe is probably the most important slide, and if we had only one to look at, we should concentrate on this one. We have Europe delivering an organic growth of close to 6%. Asia-Pac, not great organic growth, but positive 1.5%. LATAM 2.9%, Middle East, Africa, 1.1%. When you look at those numbers, you say, "Okay, everything is fine." Unfortunately, we have North America, which is where most of our issues are, which has delivered a 2.2% negative growth for the full year. This has impacted our numbers, as you see. On Q4, the situation is even worse because North America is down by 6.9%. I am making now on slide number 12, a focus on North America. First of all, as it has been said by some of the competitors, the market for Q4 has been lower than what we were expecting. It was a market more difficult. Second, when you look at the comparison and you have a graphic which is quite interesting, you see that Q4 2015, we had a growth of 6.3%. By the way, most of the years we had a very good Q4. We see a big swing in Q4 2016 with a negative performance of 6.9%. We have a very strong comparable base, which is not helping us. Most of the Mediapalooza and account losses were in the U.S. Razorfish is mainly operating in the U.S. Again, the impact was referring to previously is expected to be felt in the first half of 2017. To be clear, we have been hurt big time in Q4 and more than we expected. We told you that we were expecting a headwind quite strong. We were not expecting some of the issues, particularly the fact that the market was going south and also the fact that we would have some difficulties with Razorfish. We believe that this impact will still be felt in Q1 and maybe in Q2. Q2 will be much slower. When you look now at the countries, I think page 13 is quite interesting because we have a few good news. If you look at the countries above 10%, delivering growth between 10% and for one country, 200%, but this doesn't mean a lot, it's a small country. We see that we have some very good news coming from Argentina, Israel, the Netherlands, Russia. Russia was back, Turkey, and some other smaller country. Between 5% and 10%, this is something where we have some big markets. Australia, it's important to us. It's our 10th market. France, Germany, Italy, South Korea, Mexico, which is important market for us, Singapore also, Thailand, less important, and U.K. We see that we have some of our largest market doing well. Between 0% and 5%, you have, interesting to note, India, and also the coming back of Greece, which is posting a good number. If you move now to the freezing zone below zero, you have Brazil, which is slightly negative. We could have expected a much worse situation due to the fact that the Brazilian market is facing a lot of difficulties, and compared to our competitors, we are doing extremely well in Brazil. Canada, China, slightly negative. Japan, slightly negative, and Spain and U.S.A. U.S.A., I have been quite long on this. If we move now to Digital was affected by the Razorfish issue and delivered a full year organic growth at 3.2%, not good. In Q4, we had a negative growth of 1.1%. It is worth noting that Sapient delivered a 7% growth for the full year. We have seen a slowdown in the second half of the year in the U.S., but it's a very strong EMEA growth, and a 7% growth. I would sign for that for the whole group if we could deliver this, and I believe you would be with me. If we move now to the following page, which is an update on Publicis Sapient, I think it's important that we clarify the situation, and we give you a full picture in order that you share with us the confidence that we have in the future. As you know, Razorfish has faced a number of issues, and the most important one is the high turnover of CEOs, for reasons which are not always under our control. Razorfish has a very strong position with key clients and very good product. They are extremely well appreciated when it comes to experience, when it comes to innovation. Growth has been historically fueled for more than 50% by one-time projects. After the departure of Bob Lord, we appointed Pete Stein for about a year and then gave the CEO job to Tom Adamski, who unfortunately passed away a year later. Then we aligned Razorfish with Publicis.Sapient and found out that a full-blown merger would be far better for our clients, for our people, and for the growth. When you look at SapientNitro and Razorfish, it was clear that we had to combine them, not only because they had an offer which was quite similar, but this give also the largest operation in the field of consumer experience, omni-channel, and marketing transformation. This is something which will help us greatly for the future. It is a great solution that will help us also growing faster under one single management. This is something which is going in the right direction, and you should feel as confident as we are that the issues that we have been seeing are mostly behind us. They will not disappear overnight. We will have to make the merger working, and I believe it will. If we move now on page 16, which will be in a minute, we see that it is important to have a clear view on what is the current situation on Publicis.Sapient. When I started my presentation, I mentioned that we had to take into account an impairment charge for Publicis.Sapient. Jean-Michel will come back and will give you all the details, and for the calculation, the reason for the impairment. What you have to know is that digital business is not one business. It is many different businesses which are evolving permanently in multiple directions. I will take one example in order to make things clear for you. When you look at Facebook, everyone was considering it was fantastic, and suddenly they moved massively to mobile because the market was going to mobile. Now they are more shifting. You have seen the declaration of Mark Zuckerberg. They are shifting massively to video because the market is going to video. What characterize digital is that we need to be in constant adaptation to a new world as a result of the innovations. It is not the slow motion system that we have seen in the other industries. We need to evolve permanently. I would like to take just 30 seconds to explain the situation at Razorfish. Obviously, the various management changes have penalized growth. But it is important, extremely important, to underline that Razorfish has great and innovative teams who are delivering incredibly good work and services. New business flow has been extremely solid, but it is coming. That is the problem, and that is explaining why we have this negative growth. It is coming late in the year, and therefore, it has been insufficient to compensate the end of the project-based contract. It is not a client loss. It's not that we had some unseen or unforeseen difficulties. It is clearly that we have a kind of synetic, a choreography which has not worked very well between the end of the contract and the new business flow. This is an issue that we are addressing. On Sapient, in order that things are also very clear in your mind, Sapient had a very good year with 7% growth. But despite the very strong positioning, the quality of our digital offering with a unique combination of asset and the strongest position in the market, we felt the need to invest further in what we believe will offer the most promising growth prospect, namely Digital business transformation. As a result, we came to the conclusion that we should review our business plan, and we should therefore review our goodwill calculation. Moving to page 17, the reorganization of Publicis Sapient is aimed at capturing good growth. We have an incredibly good operation. We are best in class as regard to transformation. We are worldwide leader on omni-channel and consumer experience, and Sapient Inside is currently used by Publicis Communication and tomorrow will be used by Publicis Media. The new management is in place. It's a management who knows extremely well the operation because it is Chip Register who was already the head of Sapient Consulting. It is Alan Wexler, who was the head of SapientNitro. The merger of Razorfish and SapientNitro gives birth to the leading operator in consumer experience and omni-channel. We are investing in consulting to grow the discipline and to face the growth that we can get in this sector. We believe we will get a fair share of transformation business that will provide significant growth for the future. Now I'm handing over to Jean-Michel. Sorry for having been a bit long. I'm trying to move fast. Jean-Michel, move as fast as we can. Thank you. Thank you, Maurice, and good morning, everybody. As usual, we go now through a few slides detailing our 2016 numbers, results. 2016 is a special year for us with some emotion in presenting this result with Maurice. Aw. True. We will go on page 19 right now, looking at the P&L. Due to the distortion created by the impairment charge, we are highlighting the headline group net income first, and I will come back to detail this impairment charge. Now let's see the year as based on our current operations. Let's start with the revenue at EUR 9,733,000,000, growing year-on-year by 1.4%. The EBITDA represents EUR 1,682,000,000 and is stable in percentage of revenue versus last year at 17.3%. The operating margin is growing in absolute value by 2% to reach EUR 1,560,000,000. I will give you more detail on this soon. On the line other income expense, there is a small profit of EUR 12 million, mostly representing capital gains on small disposals. We cover the interest expense and the income tax later on. The headline group net income, as I said, which is a focus this year, of course, is at EUR 1,050,000,000 and is growing by 2.6%. Looking at below that line, we have the amortization of intangibles at EUR 51 million net of tax. The impairment charge net of tax represents EUR 1,383,000,000, and the revaluation of earn-out this year is also high at EUR 109,000,000. This later is a positive sign which relates to the perspective of profit coming from the recent acquisitions, indicating higher growth and higher profits than planned originally. We have two slides on operating margin details. First of all, personal cost, they are slightly improving by 10 basis points in term of ratio to revenue. Other operating expenses represent 20.5% of revenue, 20 basis points above last year in term of ratio, despite a good job which has been done by the teams to squeeze the G&A. We come back on this in a few seconds. Depreciation is at 1.7% of revenue, slightly lower than last year, percentage than last year, but exactly in line with the amount of CapEx that we have incurred in 2016. The operating margin rate is at 15.6%, improving by 10 basis points versus last year. I'm sorry. On page 21, this is the change in operating margin that we are presenting there. The reported 2015 margin was at 15.5%, if you remember. Had we translated the 2015 margin at 2016 exchange rates, the margin would have been 20 basis points lower at 15.3% due to mainly Forex and also the dilution effect of acquisitions. As mentioned in the previous slide, the personal costs are improving slightly in term of ratio to revenue. However, this is mostly due to a reduction in restructuring costs from EUR 180,000,000 to EUR 73,000,000. The synergies on cost coming from the integration of Sapient have been delivered as planned, and consequently, this is improving the operating margin by 10 basis points. The selective control of our CapEx spending had a consequence on the depreciation charge, which has contributed to an improvement of our operating margin by 10 basis points. The new business cost, in a year where we had an intense activity in this area, have lowered the margin by 10 basis points. To finish, the ERP implementation, as well as several IT initiatives, have reduced the margin rate by also 10 basis points. As a result, the 2016 margin is at 15.6%. I said that before, and overall, we are analyzing that as a good performance in a context of a low organic growth that you noticed. It does demonstrate the robustness of our business model and our unique ability to deliver on margin. On page 22, I will explain now why we have this impairment charge this year. I will be not very long. Under IFRS rules, we have to conduct annual impairment tests for all the cash-generating units. In our new organization, the Power of One organization, goodwill have been regrouped at the level of the five solution hubs, among which we have Publicis Sapient. Publicis Sapient concentrates almost 50% of the goodwill that we have in our books due to the significant acquisitions we made in the digital field. We knew that an impairment risk was possible, and this risk was rather well disclosed in our 2015 annual report. The test that we have conducted when we closed the 2016 books revealed that we had to impair the value of Publicis Sapient. Some triggering events were obvious, such as the specific situation of Razorfish that Maurice has already described, as well as the slowness in the Sapient integration. Another triggering event came from a market analysis. The digital business is changing, Maurice mentioned that, evolving permanently and implies the necessity to adapt regularly our offer to capture the growth. The consequences are twofold. On one hand, each adaptation necessitates investments, which can reduce the short-term margin. On the other hand, each cycle is followed by higher growth and higher margin. The impairment was the right thing to do, despite the fact that mid and long-term perspectives are maintained. In total, the impairment charge represent approximately EUR 1.4 billion, mostly on Publicis Sapient out of EUR 4.9 billion of goodwill and intangibles assets at the level of Publicis Sapient. It is a non-cash event and an accounting charge. Therefore, I don't think it is necessary to add that this has no impact on the headline EPS, no impact on the cash generated, and no impact on the proposed distribution of dividend. More importantly, we have also reflected the new financial assumption for Publicis Sapient in the 2018 margin objective. If we move now to the net financial expense on page 23, you can see that this line is now very simple, and we have a reduction of our financial cost by EUR 3 million with a total interest charge at EUR 74 million. On page 24, the tax rate is at 29%, showing a 90 basis point reduction, which is mostly due to the reduction of profit of the U.S. group entities. On page 25, the headline earnings per share, fully diluted, is growing versus last year by 1.6% and reached EUR 4.46. We will propose to the next general meeting on the 31st of May, a dividend at EUR 1.85, increasing by 15.6%. The payout ratio will be close to 42% based on the headline diluted EPS. Shareholders will have also the option to receive cash or shares again this year. On page 27, we have delivered this year a very strong free cash flow before change in working capital at almost EUR 1.3 billion, growing by 14.9% versus last year. At constant exchange rates, it is even higher. All the lines are contributing to this improvement, starting with the EBITDA at EUR 1.682 billion. Tax paid are also reducing significantly due to less profitability in the U.S., but also due to excess advance payments in several countries. CapEx are also reduced, coming back to EUR 160 million. As last year, we had some specific real estate project explaining the high amount that we had. Regarding the use of cash on page 28, we have this year a change in working capital, which is for once an outflow of EUR 355 million and was expected, coming mostly from the 2015 Mediapalooza contract losses. For the acquisitions, this year was a year where we did not have a lot of acquisition with a cash out at EUR 65 million. The earn-out and buyout altogether represent a cash out of EUR 226 million, slightly above last year. In term of cash out, dividends paid to our shareholders and to our minority interest are at EUR 230 million. The non-cash impact on net debt at EUR 202 million represents the exchange rate effect on the net debt, as well as the change in valuation of earn-out and buyout. On page 29, we are moving to the balance sheet. First of all, the reduction in the negative working capital by only EUR 176 million is due mostly to the Mediapalooza loss of contracts. The second comment which can be made is, despite the impairment charge, which has reduced the goodwill and the total equity, we have been able to improve the net debt on equity ratio at 0.21, showing again this year a very strong balance sheet. On page 30, the 2016 average net debt is at EUR 2.4 billion, not significantly lower than last year, as the bulk of the improvement of our debt came mostly during the last part of the year. The net debt at the end of December is at EUR 1.2 billion, showing a significant reduction versus last year, and indicating that we have digested an important piece of the debt coming from the acquisition of Sapient. Next page. Our financial ratios are better than our internal objectives. I have already comment our net debt on equity ratio improving from zero to 0.28 to 0.21, but we have also an improvement on the average net debt on EBITDA at 1.42. To finish my presentation on page 32, you can see our liquidity, which is at EUR 4.9 billion, and this is the last item of my presentation. You will have the opportunity, of course, to raise your question on further details, but before, Maurice will continue on the strategic update. Merci. Thank you, Jean-Michel. I am now going to give you a few information on strategic update. When we look at 2016, we have a few achievements which I believe are interesting. It was a very busy year. We decided to dramatically change our organization. We have created four solution hubs, a client-centric organization, and we created for the small countries, Publicis One, where we have all the operations under one roof. We implemented a new approach called The Power of One, and we did all this while we were defending accounts or pitching for new business. You can imagine what this was in term of commitment, engagement from the team, and how busy they could be. It was a little bit like if we were changing the tire of a car while driving. Business and clients are changing under the influence of technology, digital, data. We created The Power of One simply because we believe it is the right thing for our clients. When you look at the result, we can say that it is working pretty well. After the Mediapalooza, which was very tough for us, we started to regain momentum by regaining new account, winning new ones, and retaining account which had been lost a year ago. Our new approach is getting good traction with the clients, and it is allowing us to refill the pipeline. I believe that we are in a pretty good position. Last but not least, we continue to work on efficiencies and cash generation. When you look at all this, you look at the numbers despite a low organic growth and the fact that we have a very strong, robust business model, we can have a feeling of confidence for next year. If we look at this new era, we are all talking about what is going to happen in the future. In fact, in our business, we have to think about what is making the landscape. It is starting with the consumer. There is a new consumer journey which is leading to data, which is leading to omni-channel. There is a digital transformation of our client, which is leading not only our client to change the way they work, but also their approach to marketing and how they are dealing with consumers. All this is leading to the change of the model. There is also the issue that ANA report the fraud in digital have created. It is a situation of mistrust, and we have absolutely to strengthen the partnership we have with our client, and we have to insist even more than ever on transparency, on trust, and obviously on transformation, as it has been always the case as far as we are concerned. Advertisers have also to shift from efficiency to value creation. We are, as an advertising agency, as a partner in transformation, we are creating a lot of value for our clients. It should be good and appropriate that they see the value created by our ideas, by our work, and our technology, and that this value is recognized. When we move now to the next level, what do we see? We, as Publicis, have already entered in the new era. It's not something which is a prospect. When you compare our position to that of many of our competitors, I think that you should feel good about our position, because we have done already all the work that is needed to transform ourselves. We are one company. We moved, we shifted from a holding company to a connecting company. This is what we wanted to do, and we are acting as one. We have created the solution hubs. We moved from 14 brands and many others to four solutions plus the Power of One. We have a real client centricity. Client at the core is not something that you can easily impose in an organization of people. It's not something that comes naturally, because all our people in all the organization of the world have been educated in working in discipline, in silos, and bringing them together and making them working together is not easy. We are doing it, and we are moving fast. The digital transformation for which we have all the tools, all the capabilities, and the right talent. Obviously, the most important one for the future, data. On data, we will certainly come back to you, and we will tell you and show you the steps that we are taking and how advanced we are in that journey. On page 37, you have the current organization. Conseil de Surveillance, chaired by Élisabeth Badinter. Le Directoire, chaired by myself with Anne-Gabrielle Heilbronner, our Secretary General, and Jean-Michel Étienne, our CFO. You have Directoire Plus, which is combined with Directoire. The journey that we went through is something which is quite interesting because we have decided to create the Directoire Plus in order that the member of the Directoire Plus are confronted with all the issues that the Directoire is confronted with. You can be assured that the people who have participated are fully aware of the plans, fully aware of the issues, fully aware of what are the key leading factors in our organization and how we work. You will not have any surprise. In the succession plan and after a thorough process, the nominating committee made its recommendation to the Conseil de Surveillance. As you know, succession has been announced. The future CEO is coming from within. Arthur Sadoun has been chosen, so he is the chosen, and he will take over from me as of June 1. I must tell you that I am extremely pleased with this choice, and I am assured that he is the right choice for the group and for the future of the group. I am also extremely pleased to see that Steve King is joining the Directoire. The good thing is that the two were the selected one. They were the ones who were in the finals. The good news that they are working very closely together and that they are a real team. What you have to know is that these are people who are not only very good, but I can tell you that they will make Publicis Groupe go back to growth pretty quickly, and they will make it greater. As far as I'm concerned, I have accepted the proposal of Mrs. Élisabeth Badinter, and also that of the board, to join the Conseil de Surveillance and become the Chairman of the Conseil de Surveillance. Obviously, this will be submitted to the shareholders, and we'll see what they will be deciding. If we move to this slide, I think that all the presentation should have been limited to that slide, because it shows clearly that we moved from a moment of weakness to a new momentum, and that the Power of One and the teams and the leading people are getting today a very good momentum. We are winning account. I let you look at the list. I will not insist on that list. I will just mention two things. One is GMC. Everyone was considering that it was an account loss. It is extremely difficult when you have a creative pitch and you are the incumbent to win it back. It is much more difficult to win a creative pitch when you are the incumbent than a media pitch for a lot of reasons. The other thing that I would like to mention is Special K from Kellogg. Last year, at the beginning of the year, exactly 12 months ago, we lost it. One year after, they decided to give it back to us. I think if you need one proof that we are back and one proof that we are winning back and winning well, you have it with this. I could have told you about Molson Coors, EUR 1 billion, or some other account, Fiat Chrysler. I am not going to bother you with the wins. I want to bother you next time. Oh, no, there will be probably no next time. There will be no next time simply because it is my last time. Q1. Yes, Q1. Jean-Michel is telling me Q1. So in Q1, I will tell you goodbye. If we look now on the focus on margin and free cash flow generation, I will be very fast. We are simplifying our management structure. We moved from 14 brand to four solution hub plus Publicis One. We are still improving and optimizing our shared service organization. The ERP is already representing more than 50% of group revenue. The Sapient cost synergies are in line with our target, and we are making sure that we control well our CapEx. There are new cost-saving opportunities which have been identified. In conclusion, keep in mind that, and this is something I would like to insist again, the strengths of our business model. It is unique in our industry. I would like also to underline the robust balance sheet with the debt-to-equity ratio of 0.21 and the liquidity of approximately EUR 5 billion. Our top priority is clear. It is known to everyone. It will be the top priority of the new management. It is about growth. We have the capabilities, we have the talent. We need to stimulate cross-selling. We need to have new client development and win more new business. I am personally confident that when I am looking at the win rate, when I am looking at the pipeline, that we will be back on growth. I sincerely believe we have all engine in place and that we will fire on all cylinders to achieve our 2018 objective. I thank you. It is my last annual presentation. We will have a short presentation for the Q1. I would like to say that during all this journey, you have been fantastic with us. Sometimes you have criticized us, and it was fair. Sometimes you have pushed us a little bit further, and it was good because we improved, thanks to your pushes. Sometimes you supported us, and it was good encouragement. Thank you for all these years of being together. Jean-Michel and myself, we are ready to take all your questions. We have been less long than usually. I hope that you will notice this as a good point. Thank you. If you would like to ask a question at this time, please press the star or the asterisks key followed by the digit one on your telephone. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will now take our first question from Tim Nollen from Macquarie. Please go ahead. Your line is open. Thanks very much. First off, Maurice, congratulations on the decision and all the best as you move upward and onward. I have a few questions. I am not sure where to start because I have several. Maybe first off, if you could please let us know about the account wins that you have had most recently. I have seen a number, including even just this week. If you could let us know maybe over the last quarter or so. I am thinking of a net business figure anymore, but if you have been on a net positive win basis, at least recently, I would guess you have been and it probably is going to be contributing to revenue growth, going into the second half of 2017, if not earlier. If you can give us a little bit of color around that, please. Also, it seems like you are confirming your 2018 margin guidance. If you could remind us, 17.3% to 19.3%, perhaps lower end of that. Could you maybe give us a bit more color on that as well, please? Looks like Sapient gave you 10 basis points of integration synergies. I think you were talking 30 if not 50, going into 2017, 2018. If you could let us know a bit more about what goes into that for the margins going into 2018. Also, any color on 2017 margins would be great, please. Why do I leave it there and maybe come back if there is more? Thanks a lot. Thank you, Tim. We have a positive momentum and we had very few losses. We lost at the end of last year, Toyota in Europe. We have been able to compensate most of the losses of Toyota with Fiat Chrysler. All the rest are net wins. When you look at all the other account, HSBC Retail, this a large piece of business. Molson Coors, and I can go on. We have Merck, which is a client we didn't have. We see that the net is positive. Obviously, as always, when it comes to account wins, there is a certain time to have the things in motion. It start with spending more money in building teams, and then the revenue comes in. There is maybe 3-6 months before we get the revenue. That's the reason why we still believe that Q1 will be tough. Regarding the margin, we stick to the indication that we gave in our plan. We believe that we will be in the low end and not in the high end. The expectation should be much more in the low end. We believe that there is a few thing which will work in our favor. First is growth. Growth must generate an escalation in margin. There will be an impact. Second, is that there is a few things that we have put in place, starting with ERP, for which we already have the expenses. We have not yet the benefit. We will get the benefit. There is a few other aspect. We have some operation which are not delivering the kind of margin that it should. We have spoken about the issues on margin on the digital aspect. We need to bring that segment of our business in line with the rest of the group, and this is something which will generate a nice complement to our current margin. I think that it's not an easy objective, and I will not tell you this is something that you will do just dreaming. It's something which will require a lot of efforts and lot of work, but it's something which is still achievable. We can move to the next question. Certainly. Our next question comes from Dan Salmon from BMO Capital Markets. Please go ahead, your line is open. Good morning, everyone. Two questions. First, Maurice, could you spend a little bit more time explaining the details of how this business strategy is changing at Sapient? Is it related to the digital agency portion, to the consulting portion, to both? Are there maybe certain services where you're seeing more demand, seeing less? The second question for Jean-Michel. I think in your prepared remarks, you mentioned that a portion of the impairment was related to Razorfish. Am I interpreting this correctly, that portion is attributable to Razorfish and a portion to Sapient? If so, can you quantify the two? Great. Thank you. Jean-Michel will start. Dan, you know that we are testing at the level of CGU. It means this is at the level of Publicis.Sapient. So we don't have the precise amount regarding the different components which are leading to this impairment. But as you can imagine, Razorfish is counting significantly. But there is also what I've said during my presentation on the impairment. There is also the piece, which is the change, which are coming in the market, which have an impact on the investments that the entire business, Publicis.Sapient will have to do, which is also including Sapient, of course, to address the new dimension of the market. Yes. Also the fact that we have decided, because when you do the impairment calculation, you have to base it on a business plan, and we have decided to have ambitious objective, but less aggressive that the objective that they had. The business strategy is probably the most important issue that we are confronted with. This is something for which we are working very hard, and we looked at the evolution of the market. It's quite interesting. In 15 years, the years 2000, you look at how things have shifted. It was, at the beginning, all about display and your website just to show some ads and a presence. It shifted to search and some other media operation, and then it shifted to some more robust website, and then it shifted to transaction and commerce omni-channel. Today it is a whole new era. There is maybe four different disciplines. I will try to explain this because it is extremely important. The first one is about business transformation. When you look at our clients, they are all considering that the way they are operating is not right, is not adapted to the new world. What they do for the time being is to hire a Chief Digital Officer. They do not know exactly where to put it and where this responsibility belongs. Some have the responsibility attached to the CIO, some have the responsibility directly linked to the CEO, and they are still questioning how this should be organized and how this should be addressing the new marketing and the new consumer. We see, and it suffices to read the press every day. You see in the mouth of all the CEOs that they need to think about digital transformation. It is something which is basic. We are today a very good player on business transformation and how we can implement the tools which will help the client to transform its own business model. We are not interested at all in the supply chain and all the ERPs, et cetera. Our platforms are dedicated only to marketing and to addressing the consumer. Digital transformation is something for which we need to invest, and we believe that the growth is very important. When we look at the current operation we are looking for and the contact we have with our client, these are big chunks of business. The second aspect is experience linked to omni-channel. They are linked together. The first one is Sapient Consulting, the second is SapientRazorfish. Experience is the experience the consumer in his journey has with the brand, with the product through digital and also offline, but mainly through digital. This is something which requires a very good understanding of the consumer journey and innovation in order to take the consumer by the hand and to take he or she through, him or her, through the whole process until the transaction is completed. This requires a very good understanding of the brand, how consumers behave, and advertising. This area, this intersection, is something in which we are probably the only one capable of understanding the technical aspect, the technological aspect, and the consumer aspect, the brand aspect. We are at the intersection of all these capabilities, and there is not many people who can do it. You have two other aspects. One which is CRM, and everything which is linked to CRM. It is mostly in the field of Digitas and how to address the relationship with the consumer on a regular basis and making sure that you are enriching the relationship and taking maximum advantage of that relationship and keeping the consumer with the brand. The final one is regarding data. On data, it is a whole new world. Many people are speaking about data, and many people are showing a lot of very interesting tools. No one today has found the right approach to the best use of data. We believe that we have. We believe that we have really made huge strides in this area, and we believe that we have the right solution. We are showing it, we are presenting it to clients. We are developing a new approach. We are building something which is quite unique, and we will show that at the appropriate time publicly. For the time being, we are working very hard. I believe that when we will get out in the market vocally with our new approach, this will have an impact in the market. This is roughly what we can say about the new world, the new era, with maybe two other caveats. One is that transformation as well as data, these are heavy long-term trends. This is not something that will change overnight. It is not like a display, and there is a new social network that will change the way people will be addressing a message. This has nothing to do with search or anything alike. It is something heavy with strong potential and strong possibilities. These are the areas where we are investing currently. This is the reason why we believe that we have a clear advantage. Dan, thank you for your question, and we move to the next question. Thank you. Certainly. Our next question comes from Charles Dillow from Exane. Please go ahead. Your line is open. Good morning, everyone, and very pleased to speak a last time to you, Maurice, on the call after all these years. A few questions, if I may. The first one is, you've been able to quantify the impact of Razorfish and the budget losses for 2016 and on a quarterly basis last year. Can you maybe help us to quantify this for maybe Q1, Q2, just to help us think about the shape of the quarters? A second question is around data, which you've talked about. Where do you expect your new initiatives to really help? Is it in regaining some of the media momentum? Is it in other areas? I'm just be curious about this. My third question is a bit tedious, sorry, but if I calculate well, you've had not only an increase in terms cost, but you had a decrease in the bonuses paid. I was just wondering how you think about this, and will you guys need to increase the bonus pool again to maybe keep the morale high and the client win high? Thanks. Clearly, we are not happy to see the bonus pool going down. We would prefer much more to pay more bonuses to the people. That's clear, and we hope that we will be able to do that as revenue and margin flow in. Regarding data, it is a whole new approach based on the consumer journey and based on very strong partnerships and very important new approaches. This changed, in fact, three aspect. It does change the targeting, obviously, because we can do a profiling which is much stronger than any of our competitors. It does change the communication approach and the creative approach because we can have insights which are helping us to refine the communication. It can also help us to be much more in line with the entertainment, if I may use this word, on CRM in order that we can not only use our own data, but the data which are available in the market as well as the data of the client and combining all together and delivering something which is quite unique. Regarding Q1 and slightly for Q2, we prefer to be cautious. You remember, Charles, because you are always with us in the calls. You remember that when I mentioned last call that we may have 250 basis point against us in Q3, no one did believe it. In fact, it has been for the full year, 320 basis point. We are cautious in giving the information. We are confident on the fact that we have refilled quite nicely, not yet fully. Otherwise, I would not have to caution you about Q1 and the fact that the losses will still be felt. I believe that it's better that you do your own estimation. I am sure that we will do everything we can in order to beat your estimation positively. Thank you, Charles. We move to the next one. Our next question comes from Tom Singlehurst from Citi. Please go ahead, your line is open. Good morning, Maurice. Bonjour, Tom. Thanks for taking the question. I know technically we have got one more call to go, but thank you for all your work over the years. The calls have been a lot of fun, if a little bit long. To try and make this one a bit longer, I have got a couple more questions. First one is on the phasing of growth through the year. I think earlier on in the call you mentioned that the second quarter was anticipated to be worse than the first quarter. I do not know whether I misheard that, but can you just talk about the scale of pressure anticipated in the first half and then the moving parts as we progress through the year? Are you explicitly saying sort of one Q around the same rate as fourth quarter, second quarter slightly worse, and then a sharp sudden improvement in the second half? I would say some detail on what we can expect when would be helpful. Second question is on the write-down. I completely understand the point you make about it being non-cash, but it does unfortunately suggest something is not working with M&A. What I am keen to get to the bottom of is whether this was a, although I know it is difficult to quantify, is this a function of the fact that Sapient, in retrospect, was not as good a deal as you thought it was? Or is this really a sort of statement about the deals that went before that, DigitasLBi and Razorfish? Just trying to work out whether Sapient amplified the problems or whether Sapient is part of the solution. Thank you very much. Thank you. Probably, I have not expressed myself very well. Please forgive me if I have not been clear. I said that we were expecting a Q1 which will be negative, and a Q2 which will be slightly negative. The first half, we will feel the difficulties. We are not expecting a Q2 worse than Q1. On the contrary, we will see that we are regaining momentum. Hopefully, with the wins and if things continue, we will have a denial of the current forecast. For the time being, we are expecting a negative impact on Q1 and a less negative impact on Q2. Regarding the acquisitions, we can discuss endlessly if it is good, it is bad, it is a good deal, a bad deal. It is difficult. For example, you see we have many operation for which we had to take a loss for the earn-out, simply because we are expecting better results than what we planned. It is funny how it works, as we are expecting better results, we will have to pay more, and this will not go to the goodwill, it will go to the P&L. That is what is going on. This is quite interesting. When you look at Digitas, Razorfish, LBi or Sapient, we are speaking like a picture. It is a picture at the moment. It is not the film that we are seeing. Digitas has been delivering great results, fantastic results. Razorfish has been extremely good from the time we acquired it until 2013. We started to feel the difficulties at the change in management. We changed the management. Unfortunately, Tom was doing a very good job, and unfortunately he died. We have the issue. If I look strategically, Razorfish is an excellent acquisition, and very good people, very good solutions, appropriate solutions for the client, and advancing on innovation like probably no one else. When you look at Sapient, we had last year a very good integration and the cost savings and the synergies have been delivered ahead of what we were expecting. We had a slow start and some difficulties in term of growth. This year, we have for Sapient, a very good growth, slow down in the second half, but 7% growth. I am sure that if we were to look at this, we would say it is great. If we had it at the beginning of the negotiation that we will have 7%, 7.5%, 8% growth for the next five years, we would have made the same deal. We were expecting higher growth, and that was the business plan, and that is what is leading to the impairment. Is the acquisition of Sapient right? Yes, it is. Is the acquisition of Sapient helping us to be more competitive? Yes, it does. Is this acquisition helping us to better serve our client? Yes. When I look at all the elements, I think we have a great acquisition with great people, and I am extremely pleased with the acquisition. Now, is the price right? Probably that we will know if the price is right in three or four years' time. You cannot judge after two years. Are we right to take an impairment? First, it is mechanical. We have to reevaluate, and we have decided. You, as analysts and recommending to investors, you should be happy that we have done it. This will give a certain relief to the new management that they will not have to bother about this. You should be also relieved to see that the old guys are making the right decision for the future, and they are not trying to dress up the last presentation that we are making to you. I think that all in all, what we are doing is not only right for the company, it is right for the future, it is right for the investors and the shareholders. I think that strategically, we are really doing the right thing. Thank you, Tom, and we move to the next question. Our next question comes from Annick Maas from Liberum. Please go ahead. Your line is open. Good morning. Thanks for taking my questions. My first one is, looking into 2017, how shall we think of M&A versus integration, maybe? One of your competitors seem to have suggested that in 2017, they will look at disposing non-performing assets. If you look at your portfolio, do you think there are some assets that you could dispose of, or are you pretty happy with where you are at this stage? Just a quick one on restructuring costs. How shall we think about them in 2017? Thank you. Thank you. Jean-Michel, restructuring? Regarding 2017, we will have some restructuring costs because we have less in 2016 than expected, so we will have to do a little bit more than maybe we planned in 2017. But not much more. We will have roughly an envelope of EUR 90 million-EUR 100 million of restructuring costs in 2017 as very close to what we would have expected for 2016. Regarding M&A, there is three aspect. Are we going to dispose? I don't believe so. When we look at the assets we have, we are quite nimble, despite the fact that we have EUR 10 billion of revenue, roughly. We have not operations, we are dragging us down, and the issue that we have are with strategic operation that we are fixing, and I don't see any important disposal. It may happen that in some country, in some area, we have a smallish operation that we will close or dispose, but I don't see anything important that we might dispose. If we look at large acquisition, I can say loud and clear that I would be extremely surprised if anything happened of the like in 2017. We will see probably a few limited acquisitions that we will be making in some areas, either for completing a position in one market or for completing a discipline in a specific area. We have no big plans and no big leads to acquire something important. We have been invited, and we have seen some presentation of operations that were offered to the market, and we passed. Thank you for your question, and we move to the next one. Our next question comes from Brian Wieser from Pivotal Research. Please go ahead. Your line is open. Thanks for taking the questions. First, a couple about related to Sapient. When you mentioned Sapient was up by 7%, was that for all the acquired entities, or is it for the entities that currently report into Sapient? Looking inside of Razorfish, is it correct to say that if we backed out Razorfish, given how U.S.-centric that is, that the North America or the region would have been flat for the year? Then a second question. Can you talk about the revenue and financial impact of shifting to the Publicis One model in countries where you made the transition earliest? Curious to hear any thoughts on that. Thank you. Okay. Brian, I will start with Publicis One. Publicis One, we are extremely happy, and the solution that we have created is something which is really working very well. We believe that this will be a small but a nice engine for growth and a nice engine for generating good margin in areas where it is always difficult and struggling to find good revenue and good margin when you are dispersed with many operation. It was the right thing to do, and we are extremely pleased with the current result. You are right. If Razorfish had not delivered a negative growth, we would have had a situation relatively steady in the U.S., and we would not have seen a decline roughly. This is in rough numbers. I have not made the exact calculation, but that is right. The Sapient is 7%, is roughly the same percentage from SapientNitro and Sapient Consulting roughly. This is what we call the legacy, what we acquired, and this is what is generating the growth. So it is something which is working extremely well. We can always look in the detail, and there are some aspects which are working better and moving faster than some others, but that is always the case in all operations. But we have the Sapient operation generating 7%. These are the operations that we acquired at the end of 2014, and we integrated at the beginning of 2015. So the percentage applies to both, and we are honestly pleased with that percentage because it is a good one. As I said, I would have wished that the group deliver that level, and I am sure that if the group were delivering that level, the kind of question that we would have received from you and your colleagues would have been very different. Thank you, and we move to the next question. Our next question comes from Adrien de Saint Hilaire from Morgan Stanley. Please go ahead. Your line is open. Yes. Good morning, Maurice, Jean-Michel, and Jean-Michel. Thanks for taking the questions. First of all, Maurice, I think in 2014 and 2015, I think you were also talking about a soft start to the year, which would then see acceleration in the back end, and this didn't materialize back then. So what gives you confidence that this will happen for 2017? Secondly, maybe for Jean-Michel, I am not sure I understand how margins could grow in 2017 because you mentioned higher restructuring charges. Organic growth will remain quite soft. So why should we expect margins to go up? Maybe excluding for the Sapient synergies. Then lastly, back to Maurice. I think Luke Taylor recently left the group. So I am just wondering if there's anything wrong going on at DigitasLBi. Thank you. Thank you. Okay. Jean-Michel. Okay. The question on margin 2017. We have some programs which have been delivered in 2016, which will generate some saving in 2017. This is something that we should have in mind. We have a cost reduction program, which is extremely clear, on which we are working right now, and we expect to have these results already during the year 2017. This is something which will explain what we are expecting regarding the margin in 2017. The effort on cost reduction is very strong. We have plenty of things which are coming, harmonization of processes, work on utilization rate and so on. I don't want to enter in this kind of detail. We have also the benefit of the structure which has been put in place in the solutions for which many simplifications happened in 2016 and for which we didn't have the benefit in 2016. Okay. Back to your questions. The two questions that you put, one is regarding Luke Taylor. The other one is why should we be confident on the back end of the year? I will not dwell with 2014, 2015. Regarding 2017, there is two reason why we feel confident. The first one is that we are seeing the end of the consequences of the losses. Unless if we are really with bad luck and we have three or four losses which are big, which happen in the weeks to come, I think that we will have the year which will follow the pattern of a negative Q1, a less negative Q2, a better Q3, and a better Q4. This pattern, including when you look at the comparison base, including when you look at how clients are expecting to spend and to distribute and how they phase their marketing budget, this is something for which we have a good level of confidence. Regarding Luke, it is part of what's happening in companies where we have people who have been doing for a few years job and they look at their future, and they believe that they should be doing something else. On top of that, we have with Nigel Vaz, a great leader. I wish the best to Luc, and I think it's a very good move for us and for him. It's all positive. We move to the next question. Our next question comes from Julien Roch from Barclays. Please go ahead. Your line is open. Yes, good morning, Maurice. I can au revoir because we will talk at the Q1, but thank you for all the memories. My first question is on the Sapient impairment. You said the mid to long-term prospects are maintained, but you lowered short-term growth. Can you give us some color on what is the level of short-term growth you expect, and what is the medium-term growth you contemplate? That's my first question. Second question is, what is Alan Ulrich's role in the new organization? I don't see him on slide 37, but if I search on Google, it still says that he is CEO of Publicis Sapient, so your website not up to date. That's my second question. The third one would be, and I know he's not on the call, but what is Arthur Sadoun's view on the 2018 margin target? Is he fully behind that or will he need to think about it once he starts as CEO on the 1st of June? Arthur was here till few last minutes. He had to leave to the airport. He has participated in the meeting. You will be able to put directly the question to him shortly. I'm not going to answer for Arthur. What you have to know is that we are working transparently with the older member of the 3A since years. It's not something that we are doing in catimini, Jean-Michel and myself, in a small cabinet. No, no. It's something which is open, and it is shared by all the people. Alan Ulrich. Alan Ulrich is with us. Alan, in last August, decided that he would like to be less operational and to have a different kind of job. He wanted to concentrate on three aspects. One, which is about strategy, one which is about the transformation of the group, and the third one is some key important clients. This is what he is doing, and he recommended a new management team based on the people he was working with since many years. We followed his advice, and he is playing a role of non-executive Chairman of Publicis.Sapient, and he is working on those strategic aspect. Short term, when we have between 6%-8% growth, that is short-term growth that we expect. If we move to mid and longer term, we expect to be closer to double digit. That is how we plan for the future. We expect 2017, 2018, that Sapient will deliver about 6%, 7%, maybe more, hopefully. We expect that 2020, it will be more, 9%, 10%. I hope that is clear, and we move to the next question. Our next question comes from Bruno Herring from Oddo. Please go ahead. Your line is open. Yeah. Hi, good morning to everyone. My question has been mostly asked, but I have just one left concerning the tax rate, which is at 29%, and more question for Jean-Michel. Can you tell us what the tax rate in the U.S. is, which is the first question? Then, to be honest, I have got no clue on what the impact of the Trump administration could be on the tax rate. When is it going to be? Do you have an idea? Is it something to expect, like a decrease in the tax rate in the U.S. more for H2 for 2018? Any insight would be helpful. Thank you very much. I thought that you will tell us what will be the tax rate in the U.S. in the future. Jean-Michel will answer that. First of all, to the second part of your question, there are a lot of speculation. To be fair, nobody knows what will be the tax rate. People said that the tax rate can be lower, but we will have a lot of possibility of we will have a non-item, which will be non-deductible. This is a kind of situation which is, in fact, the reduction could be a little bit fake, to be fair. The tax rate at 29% that we are posting, I say that the reduction was mostly due to the impact on U.S. entities. The effective tax rate, all in all combined that we have in the U.S. is in the region of 37%. 37%, this is what we have in the U.S. So tax rate is extremely high. We move to the next question. Our next question comes from Sarah Simon from Berenberg. Please go ahead. Your line is open. Yes. Hi. Just a couple of questions. Firstly, you've talked about growth driving margin positively towards 2018. Can you quantify how much the negative organic growth from 2016 impacted your margin overall? Secondly, on leverage, obviously that's coming down pretty fast, and you've said you're not going to do much in the way of large M&A. What do you think is the right level of leverage for the company on an average net debt to EBITDA basis? Thanks. Okay. On the negative growth in the U.S. mainly, and the impact on our margin, do you have a calculation? Yes, of course. In 2016, we have a posting in North America, a margin rate which is at the same level as the one that we have in Europe. Knowing that the margin in the U.S. is structurally far higher. You saw the good growth in Europe, where the margin has improved in Europe. And you saw the growth in North America, which is not great. And the effect on the margin, which is putting the margin of North America exactly at the same level as the one that we have in Europe. Okay. If you want to have the right calculation, we can put it- It's available. Yeah, I know. It's something that is in the press release. No, I know exactly. But the impact, it's something for which we can make a precise calculation and put it on the website. Just to divide by two the difference. In fact, it's that easy. Regarding now the balance sheet and the M&A, as I said, we have a very good balance sheet, very solid. This has led us to anticipate the payout ratio at roughly 42% and to do it now. So we hope that the shareholder meeting will approve it. And we are at point 21. Our objective is first to reduce a little bit the debt, and then we will have to revisit a little bit what we are going to do with the cash situation, as we are a very good cash generator. And this is something for which we will probably be in a position to answer more fully at the time of the AGM. Thank you, and we move to the next one. Our next question comes from Matthew Walker from Credit Suisse. Please go ahead. Your line is open. Thanks very much, and thanks, Maurice. Just a couple of questions, please. The first is, can you be a bit more precise on the 2017 margin, or at least walk us through the building blocks in terms of so much Sapient synergies, so much benefit from cost savings, and give us an idea about what the contribution, both on the revenue side and margin side, will be from the new business wins since Q3? The second question is really on consulting. If you could give us a bit of an idea about how much revenue you anticipate, or what potential revenue in Sapient you anticipate from business transformation, that would be useful. And whether you think that rather than pursuing this path yourself, maybe a combination with a consulting group will be a good idea. And whether you think in that combination, you might be more of a junior partner or a senior partner. Thank you. We already collaborate with some partners. We are collaborating with BCG, with McKinsey on some areas, and we are making some common offers. This is something which is working already quite well. I can't give you any precise number on what we are expecting. We believe that this is going to grow. We have some internal objective, but as we are never detailing the objective by unit or by segment of business, we don't believe it would be right to do it. On the margin side, I'm handing over to Jean-Michel, who was waiting for the hot potato. The hot potato, you said? We are committed to do the best we can regarding the margin 2017. We have cost reduction program. We are not counting a lot on the effect on growth. Of course, if we have the growth we are expecting, it will be easier to deliver the improvement in margin. We are putting the bulk of our effort on the cost reduction program. The Sapient integration cost of synergies, synergy savings, sorry, has been delivered in 2016 as planned, helping a little bit the margin for 2016. We have another piece which is coming in 2017. We are counting a little bit, of course, on the decision to merge Razorfish with SapientNitro in the U.S., which is something extremely important, building something absolutely new in the market. This will help, by definition. We had also some delays in the integration plan of Sapient, which has been mentioned already. This delay, we will deliver what has not been delivered in 2016, and this will help also the 2017 margin. Plenty of programs, cost reduction programs, are in place in each single solutions. There are some group initiatives also. Share services also, they are transforming themselves with delivering another layer of savings. This will help definitively the 2017 margin. Okay, we move to the next question. Our next question comes from Lisa Yang from Goldman Sachs. Please go ahead. Hi, good morning. A couple of questions from me as well. You mentioned in the U.S. that the underlying market was a bit weaker than expected. How are you seeing the market at the beginning of 2017? Do you think it is mainly cyclical or are there also some structural issues and maybe some clients going direct to the online giants? Secondly is on your 2018 margin target. Let's say it is at the low end of 17.3. Consensus at the moment is at 16.4, so what do you think people are really missing? Is it the additional cost savings you are doing? The last one is on P&G's comments recently about cleaning up digital media, et cetera. There is still a lot of, I would say, negative sentiments on the industry right now. What do you think can be done to address these issues, and how long do you think that could realistically take? Thank you. I will start with the last question regarding the position of P&G. It happens that I was speaking at CNBC in Davos the day before Marc Pritchard made his comments, and I was making exactly the same comments. We are fully aligned. It is not because it is our largest client that we are fully aligned. It is simply that we think alike. There are a lot of issues for which we believe that we need to take some strong actions, which are very important for the industry. Restoring trust, doing everything we can to kill the frauds on internet, and you see this every day. Finding solutions for transparency. As far as we are concerned, we have very little principal business. When we have principal business, our client know exactly that it is principal. This is extremely clear, and I would have wished that all our competitors do exactly the same. There is a few issues, and we know that measurement is at stake, and that the real issue is that we need third party in order to certify that the audiences that we are selling to the clients are the right ones. This is something for which we really need a push from the big platforms and from the clients all together. The industry together has to work in that direction. There is no reason that we have for TV audiences, radio audiences, press audiences, a third-party measurement. Platform, we have no third-party measurement, and we have to take for granted the numbers which are given to us. This is quite simple and clear. Regarding the 2018 margin, what people are missing. I do not know if they are missing anything. I think that 16.4, they see something which is slow improvement. Jean-Michel Étienne has been quite detailed on the plan for the delivery of the margin, and there is also a factor that has to be taken into account, which is the growth, which is always accelerating the margin. Today, that is the reason why I was insisting on the robustness of our business model, because with such low growth, normally we should have seen a deterioration of margin. This is what you see normally in any given industry. When you have no growth or very little growth, you see a decline in the margin, and you see an improvement in our organization. This proves, if need be, that we have a very strong and very robust business model, and we should see an acceleration of the growth and an improvement in the margin. Regarding the U.S. market, there is a kind of separation between the geopolitical situation, the economic situation. We have a geopolitical situation which is uncertain with a lot of different forces which are going in various direction. We don't know exactly what will happen. When you look at the economic situation, we see some positive trends. Is it something that will resist in the future? Will we have a very good 2017 year? It looks like the objective of Donald Trump as a President is really to give more jobs to the Americans and to make sure that there is better pay, that there is a stimulus in order to generate more jobs. This is something which may, if it does happen, fuel the growth not only in the U.S. but on a worldwide basis, because as we know, U.S. is generating growth for the world. That is the current situation and what we are seeing. Okay. I think that we are at almost the end. I don't know if we have still people in the line. Maybe we can take one more. There is two. I understand people are two. We take the calls immediately, and we stop right after the two calls. Certainly. We'll now take a question from Chris Collett from Deutsche Bank. Please go ahead. Good morning. Yes, it is Chris Collett from Deutsche Bank. Just in the interest of time, just ask one quick question, and that is, about a year ago, there was a reasonably high level of staff turnover at Publicis Groupe. Just wondering of what you are seeing now in terms of turnover, anyone being put off by some of the reorganization and in an environment where you have been cutting costs and trimming bonuses, are you seeing more movement away to some of the competitors who are in the internet space who are prepared to pay more and are really luring people away from agencies? Okay. On that front, I do not know where you are getting the information that you see more turnover at Publicis Groupe than other operation. Based on the information that we get from an industry standpoint, we are in line with the industry, no more, no less. Maybe there are some who are having a higher turnover and some who are having a lower one, but on average, we are with about the same rate of turnover. No more, no less. What happens is that there is a lot of communication about the people moving because particularly in the internet field, we have more people than any of our competitors, and therefore, the platforms are sometimes coming to us or the startups, and they are poaching. But on average, we have no more than others. What we need to do is obviously to make sure that we can deliver and to make sure that we can make our compensation even more attractive, and this is clearly a strong objective for us. I think we have now the last question, and I would like to thank you. Last question. We will now take our final question, and then Mr. Lévy will conclude the call. Please go ahead, Conor O'Shea from Kepler Cheuvreux. Your line is open. Yes. Thank you. Good morning. Just a couple of questions from my side. Maurice, when you refer to the weak underlying U.S. market toward the end of the year, are you referring to the advertising market in the U.S. or to agency ecosystem as such? Do you think that the 15.5% margin in the U.S. that you generated in 2016 is the low point? Second question, just on the BRIC and MISTA number at the back of your slides under the old disclosure, I think it was -5.5% organic in Q4. Just wondering what was driving that. The final question, just on the CapEx, I think several times during the presentation you referenced the need to step up investment and data management platforms and so on, yet your CapEx and depreciation both declined as a percentage of revenues in 2016. Just wondering, looking forward on that, particularly with regard to Publicis Sapient, where we would expect increasing CapEx intensity, what should we expect directionally on that from 2017 onwards? Thank you. Okay. Maybe Jean-Michel will start, and I will finish. Okay. We will cover the question on the CapEx. EUR 166 million in 2016 is an amount that which has been allowing us to do what we need to do. We do not push back requests for spending and so on. It appears that in 2016. In 2015, we had a lot of real estate projects, which has led to more spending in order to equip the new premises for our agencies. It is clear that we will have to invest a little bit because, especially when we spoke about the need to go more on the business transformation, we will have some OpEx, as we said, in the P&L, but we will have also some CapEx. It is possible that the amount will increase slightly in 2017 and onwards, but not hugely. Honestly, we can live with this kind of envelope a little bit more, but not hugely. Okay. On the BRIC, I do not know where you are getting this information. I do not want to be mistaken. Jean-Michel will have a look at this, and he will be back to you. Regarding the weak environment of Q4 2016 in the U.S., it is something that we have seen in many areas. It is not only the advertising ecosystem, it is also on the investment for the media. It is also in some numbers that you have already seen because some have been published of some of our clients where there have been a kind of smaller revenue in the I am looking. Jean-Michel was looking for the numbers. Here we are. Yes. In fact, it is BRIC and MIST, sorry. Yes. Okay. That is mainly the answer. I do not believe that it is just the advertising ecosystem. This is a much broader question. Do we have the right ecosystem? Can we expect to see a situation which will be improving? That is a big question mark. On BRIC and MIST, one of the issues that we have seen is a problem of China, where we had a reduction. Brazil also, while Russia was better. Turkey, because it is MIST, it was also better. Mexico has been delivering a good, positive growth. All the other operations were negative. Yes, Indonesia was a bit small. Singapore was with a small decline. South Africa also. On most of the issues that you have seen, it is a market situation and not really a situation due to any specific operation. On the contrary, when you look at Brazil, we have outperformed the market, even if the numbers are negative. We have won a lot of accounts, and we have strengthened our position in an incredible way. China is a slowdown of the market, and the other markets also. This concludes the call. I would like to thank you all. We will still be meeting for the last time for the numbers of Q1. I hope that when we will be showing the numbers, we will have a better presentation in term of growth than to what we are currently expecting. We are working hard on this, and I want to assure you that we will do everything we can in order to deliver the numbers that you are expecting from us. Thank you.