Maurice LÚvy, CEO
Maurice LÚvy, CEO
EuroBusiness Media (EBM) : Publicis Groupe, the world’s third largest communications group, reports annual results for 2011. Maurice LÚvy welcome. You are the CEO of Publicis Groupe. What are your comments on the Group’s full-year results ?
Maurice LÚvy (ML) : We have a very good set of numbers. Revenues were up by 7.3% compared to published numbers last year. The organic growth has been at 5.7% and our margin has reached the level of 16%, which in our wildest dream was not possible to reach. So we are very happy with that set of numbers and also with the net profit, which is at €600 million, up 14%, and the earnings per share is at 12.3%, up compared to last year. So when you see that set of numbers, you can think about a lot of philosophical comments but I would prefer to say just simply “Thank you to my teams, thank you to my clients. I’m very happy :”
EBM : What are your comments on the business trends, by geography and by sector, as we begin the year 2012 ?
Maurice LÚvy : This year is a year with a few positive aspects, which is particularly the quadrennial, because we expect to have every four years the Olympic Games ; they will happen in London. We expect the European Cup ; It will happen also. And we expect the US election ; it will also happen. All this is fuelling the advertising market and this should be great if, by the same token, we had not a few uncertainties, particularly regarding the euro zone, the sovereign debt and also a slow-down in growth in some emerging markets. So we have to be cautious. However, when you look at the situation we are in, with a very solid balance sheet, with a few acquisitions that we made last year which will move our growth full steam ahead, I believe that this year will be rather good. I’m expecting a relatively good growth in the US ; I’m expecting the euro zone to be still a tough battlefield and, obviously, the emerging markets, which represent today more than 25% of our revenue, will be up. The good news also, regarding Publicis, is the fact that we have more than 30% of our revenue which is derived from Digital and Digital is working well, with double digits. So all in all, we should have a relatively good year.
EBM : What will be the impact of the loss of the GM contract on your revenues and margins this year ?
Maurice LÚvy : GM is a very good client and I’m very proud of the work which has been done by Starcom and we are very happy to continue to work with GM on a few other operations, which by the way are the largest ones. I’m obviously sad that we have lost the media business from GM and this represents roughly 0.5% revenue on a full-year basis. We don’t anticipate a big impact and I remind you that last year we have been very fortunate by having a new business trend, which was just spectacular, with $7.9 billion of new business acquired and the number 1 spot. So we feel sad to have lost that business, but we feel confident that the impact will be very limited, if any.
EBM : What are the prospects for improving revenue growth in China and Latin America this year ?
Maurice LÚvy : We have some very good news. In China we have been by far the best performer in new business. We have a very good organic growth and we have made some very interesting acquisitions which are putting us in a very good place. We have 5,500 people working in China and we believe that that this year will be a Publicis year. The Lion and the Dragon should go hand in hand. So I’m confident on China. Latin America has been tough for us in Brazil, because of the fact that one of our agencies has lost its management, people, etc. in 2010. We have suffered the impact in 2011, we made a lot of changes - and positive changes - and we expect this year to have very good growth in the whole region. So we are quite confident regarding Latin America. Everything goes in the same direction regarding the emerging market as well as regarding Digital. So we are pretty confident in the segments which are in the good side of the growth.
EBM : Do you expect that the growth of your Digital business will again outperform that of your peers this year ? If so, what makes you so confident ?
Maurice LÚvy : I do expect a better growth than the competition. And why am I confident ? It’s simply because it’s not only a few acquisitions that we made or the fact that we have the number 1 and the number 2 worldwide networks in Digital, it is also because we have a very important change in the mind set. We are the only agency which is at the intersection of communication and technology. We have been wise enough to have the vision to sign agreements with Google, Microsoft and the likes. We are partnering with Facebook and AOL and Yahoo like no one else, and we have the true solutions which are possible for a client : on the one hand we have these stand-alone operations which are totally devoted to Digital ; on the other hand we have integrated operations which are absolutely in tune with the communication strategy. So we can serve our client either way : integrated, stand-alone. But in any case, what we are offering is state-of-the-art in this field.
EBM : How are you dealing with staff cost inflation ?
Maurice LÚvy : Staff cost is a real issue, not only for us but for the whole industry. There is a scarcity of talent, particularly in two areas. One which is Digital and we are competing against the big boys in that field. And the second is in the emerging market, where there is not enough talent available in the market for the size of the market. So therefore, the competition is really tough. What we are trying to do is a combination of soft compensation and hard compensation. The hard compensation is something which is very well known and we try to keep it in the reasonable limits and to do that we have to insist on the soft compensation, which are : our values, the way we work, the spirit which is amongst all our teams and the fact that we are very different from the competition in terms of our fundamental values. And the people in our company are very happy, so they stay longer. And we have a retention programme which is based on both LTIP (Long-Term Incentive Programme) and training, which is very rewarding for the people. So all in all it’s tough, it’s complicated but we are coming to a place which is, I believe, mostly satisfactory.
EBM : What’s your update on your ERP roll-out ?
Maurice LÚvy : What we want to achieve with the ERP is to have the same system operated everywhere in the world, in order that we operate all our operations through the same technology system and the same financial system and reporting system. All this is taking a long time in order to make sure - because of the nitty-gritty operation that we have - that we have something which is working well. So we will be starting the test in major companies during the next summer and it will take roughly one more year to be sure that we can roll it over.
EBM : What are your prospects for margin improvement this year, as you must find the right balance between your shorter term investments in Digital and recent account wins, and your longer term ambition to increase margins ?
Maurice LÚvy : Our long-term ambitions to increase margins are still very vivid and we believe that we will get there. The real problem is to make the right investment in order to get the return on that investment. So we will continue to invest. We have reached 16% margin, which was unexpected. We were expecting at best 15.8%, so we have been very lucky with this number. It has been painful to get there, so if we can maintain this level, we’ll be very happy. Not because we don’t want to improve, it’s simply because we want to continue to invest. So 16% in 2012, if we can deliver that number we’ll be very happy !
EBM : What is your strategy for M&A investments this year ?
Maurice LÚvy : We have a strategy which has been set since a few years, which is still the same, which is to focus on two dimensions : technology (Digital) and emerging markets. Digital can happen everywhere, including in emerging markets. So we are targeting a few acquisitions in this segment or market and we have currently an operation in Germany : we made a public offer for the acquisition of the largest advertising agency in Digital, which is Pixelpark.
EBM : What are your plans if Dentsu decides to sell its stake in Publicis at the end of the lock-up period ?
Maurice LÚvy : As you know, Dentsu has the high hand on this operation. They must decide if they want to sell or not. If they want to sell, we have already made clear that, at least for part of this, we will be happy to acquire it and to cancel the shares. We have a balance sheet which is very solid, which allows us to do that. And now it’s up to Denstu to decide what is the best for the stake that they have in us. We have a very good partnership with them and I believe that whatever will happen we will remain very good friends in the future.
EBM : Maurice LÚvy, CEO of Publicis Groupe, thank you for joining me.
Maurice LÚvy : Thank you.