Value investors always find ample occasion to meditate on Horace’s verses masterfully refitted and translated by Benjamin Graham in the preamble to his magnum opus Security Analysis:
Many shall be restored that now are fallen,
and many shall fall that are now in honor.
Publicis just reported record billings, earnings and dividends for the year closed. God knows what that means for the next one.
The French group is widely regarded as the best-managed of the advertising titans. The reputation isn’t unearned, but reputations are soft things; the arithmetic is not. Even the best house in a dull neighbourhood must be judged by its foundations, not its facade.
A decade of results offers the only fair test and an objective look at long-term economic performance. Consider the 2015–2024 stretch — a broadly prosperous cycle, interrupted only by a brief nuclear winter at the start of the pandemic.
Over that span, revenue advanced from €9.6 to €16 billion, which works out to roughly 6% annual growth. Cash earnings — a.k.a free cash flow — moved from €1.2 to €2.1 billion, a slightly quicker climb.
Yet the progress looks less sprightly when divided by the growing shareholder base. Diluted shares outstanding rose from 226 to 254 million, trimming cash-profit-per-share growth to about 5% a year.
Perspective helps. In Publicis’s defense, even that lesser figure towers over those of its peers. At Omnicom and WPP, cash flow per share spent much of the decade moving sideways despite energetic buybacks.
Where the story becomes more revealing is in capital deployment. Over ten fiscal years the group generated something close to €18 billion in free cash flow. Roughly €10 billion was committed to acquisitions. €5 billion found its way back to owners. €2 billion reduced debt. The final billion simply lingered on the balance sheet.
Most of the cash returned to shareholders took the form of dividends. Buybacks made up the remainder, though they never kept pace with new issuance. Hence the rising share count.
As for the €10 billion deployed on acquisitions: If one assumes zero organic growth — a harsh but clarifying assumption — then the incremental €0.9 billion in free cash flow implies a 9–10% return.
However, add back any organic lift and the return on deals starts to thin out, leaving an uncomfortable conclusion: either the portfolio of agencies has little organic momentum, or the acquisition program has been a mediocre lever of value creation.
Both can’t comfortably be true.