Maurice LÚvy, CEO
Maurice LÚvy, CEO
EuroBusiness Media (EBM) : Publicis Groupe, the world’s third largest advertising and communications group, reports its third quarter revenue. Maurice LÚvy welcome. You are the CEO of Publicis Groupe. What are your comments on the group’s performance in the third quarter ? Did the jitters in the financial markets and the uncertainty about Europe’s economic future in the past eight weeks have any notable effect or impact on client ad spending in the third quarter ?
Maurice LÚvy : In a context of uncertainty and financial turmoil, the numbers that we are releasing today are very good. And I’m very pleased, because we are posting an organic growth of 6.4%, which is coming on top of 9.2% last year. So it’s a very good performance and I’m very pleased and very thankful also for our teams and our clients. If we look now at how this has been done, I think it’s quite interesting, because what people are considering as the old fatigued market, such as the US or Europe, we see that they have been performing extremely well. Solid growth. And if you notice that we have France and Germany above 10%, this is quite a performance. So we are pleased with the numbers released. However, we have to look at the current situation and the context in which this has been achieved. We all know that since the end of July, beginning of August we have been caught in a kind of turmoil, not only regarding the debt of the countries in the Euro zone, but also with the deterioration or the downgrading if you prefer, to be very candid, of the US credit note which has lost a notch. So, in this context, with all these issues, we have seen a very good resistance of our clients and, by the way, I think it’s important to notice that we have seen very little erosion. Very little cuts, it has not been the situation that we have seen in 2008 or 2009 where cuts were coming massively, every time we were picking up the phone, it was to get bad news. So, we are getting some bad news, but not really, neither at the speed nor at the magnitude of what we have seen in the past. All this is giving me good feeling of confidence.
EBM : You spoke of mature markets. What about emerging markets in this third quarter ?
Maurice LÚvy : We have been very pleased with the performance that we have seen in China. Greater China has been at 10% of growth, coming back from this situation which was with a much slower growth. A very good performance in Russia as well as in Brazil. So when we look at the emerging markets we are very pleased with what we are witnessing currently.
EBM : How does the month of October look so far compared to the third quarter ?
Maurice LÚvy : It’s still a little bit early to know, but what I can say is about the information on cuts, on budget cuts, and the information on budget cuts remains relatively low. So again we are not seeing a reaction of our major clients considering that they should cut heavily their media expenditures and we are not witnessing a panic. Probably the main reason for that is the fact that in 2008/2009 they were all concerned about the risk of the credit crunch and today their balance sheets are very solid and they are all cash positive or they have a level of cash which is very good. So for the time being – and we will have to see what will happen at the end of the year – we have a relatively good situation. For Q4, which is the last quarter, we will be facing in fact two hurdles. One is the comps. When we are comparing Q4 2011 to Q4 2010, we have to take into account that the last quarter of last year was up by 12.5%, which is making comparison very difficult. On top of that, what we do know is that in the weeks to come, the next four or five weeks, clients may cut more heavily, because if the sales and the profit are not there, they will cut massively the media expenditures and their advertising or marketing expenses. This is something which is a phenomenon that we are familiar with, because every year they are using marketing expenditures as an adjustment to their profit. So either they have very good profit and they spend more in order to gain market share or they are in a situation which is a little bit tight and what they are doing is to reduce their expenditures in order to bring the money down to the bottom line and to have a better profit. So this is the unknown factor for which we don’t know. I prefer to say the reality – we don’t know. We don’t know what will be the reaction, but if this is neutralized, we are quite confident for the full year and we have the feeling that the full-year 2011 will be a good year and that will be delivering a growth which is ahead of the market.
EBM : General Motors opened a competition for its global media business. Given that you have GM’s US media business, should we view this global competition as a risk or an opportunity for you ? What are the chances that, even if you do win this competition, it will be lower margin business as a result of the call for bids ?
Maurice LÚvy : As always when there is a competition, it is a risk and an opportunity. It happened that so far we have some of the greatest brands and the rate of success that we have with both Starcom MediaVest and Zenith Optimedia is very high and we have probably the very best operation on the market. So I’m very confident that our teams will do their very best and I’m sure that they will do whatever it takes to convince the client that we are the right choice. But, as I said, who knows ? But I’m quite confident on that aspect and I believe it is much more an opportunity than a risk and I hope that it will convert into something positive. Regarding the margin and the pressure, we have here an example of what we are living every day and our everyday life is about the fact that the clients are looking for efficiency, they are looking to reduce costs, they are looking to spend less and this is our bread and butter every day. This is what we are having in every relationship with all our clients. So we have to deal with this and the way for us to protect our margin is to lower our cost and to work differently, to use more technology, to find solutions, to have deals which are protecting our margin. All this is something which can happen as long as we are able to best serve the client. If we are bringing innovation, quality, performance, if we are bringing solutions which are more efficient and where the effectiveness of advertising, the effectiveness of the strategy is such that at the end of the day the client is getting more space for less dollars, or more impact for less dollars, or more contact for less dollars, it works in our favour. So, we are confronted with this kind of situation every day and I do hope that not only will we be able to retain the piece of business that we have, but that we will be able to gain a few more markets and at the same time to show the client that we can bring efficiencies while we will be protecting our margin. It’s a difficult challenge, but as I said, this is what we are doing every day.
EBM : What is your update today on your digital activities, notably the integration of Rosetta and the outlook for that acquisition ?
Maurice LÚvy : We are very pleased with the integration of Rosetta and we are very pleased with the way we are working with Chris and his management. So everything is working in the right direction. We have no big surprise and as you know, we have a process and a philosophy and a culture which is helping us a great deal when it comes to integrating newly acquired operations and this is working exactly in the same format and with the same speed as the former acquisitions that we have made. So this is not a concern. Regarding our digital activities, we are quite pleased because we already have reached the bar of 30%. We are slightly ahead and this was expected to be reached a little bit later. So this is fantastic and we are extremely pleased. On top of that, I think that it’s very important that when you look at digital, it is clear for all the platforms, for everyone who is working in that field, that the pioneer in this sector as far as advertising is concerned is the Publicis Groupe. We are inventing new formulas. We are creating new systems. We are creating new technology. We have been inventing AOD that is today the standard for the profession. We have created the video format for AOD which has been launched in March this year, well ahead of all our competitors and they are following in our steps. We are now dealing with AOD and video with Facebook. So we are clearly well ahead of all the competitors in that field and I believe that we will continue to strengthen our leadership position.
EBM : You have budgeted roughly €700 million for acquisitions, and a significant portion of that was already spent on Rosetta. Should we still expect you to be making more acquisitions by the end of this year ?
Maurice LÚvy : As you said, we have spent most of our money already on Rosetta and we have probably spent, for the first nine months, about €750 million. So we have a few more acquisitions to be made from now to the end of the year, nothing highly noticeable, so I think that we will be in the region of €820/30 million. The few things that we are negotiating currently concern China and a few other emerging markets.
EBM : And finally, one of your main competitors sees the advertising market growing by only 3% in 2012, whereas your own Zenith Optimedia projects 5.3% growth of the advertising market next year. Where do you personally stand on your outlook for the Group in 2012 ? Do you have any early feedback you can share with us on client budget setting for 2012 ?
Maurice LÚvy : The current indication that we have is that the Zenith Optimedia forecasts seem to be relatively solid. But as you have seen in the recent weeks, the forecast has been changed several times and we had in July 5.9%, it is now in October 5.3%. We are considering that the market will probably be in the region of 5% and when we look at the history of what has been the forecast of Zenith Optimedia, they have been mostly on the ball park of the actuals. So they are pretty reliable. We are considering that this level is achievable. We are obviously very cautious and the information we have from our own clients is also to be relatively cautious. However, when we put all the numbers, including the accounts that we have won, the ones we may have, when we look at all these elements compound, we believe that the number of 5%, 5.3% for the market next year is something which is, as of today, achievable. Publicis is obviously trying to always beat the market, this is what has been our history in the past, and when you look at the recent past we have outperformed and not just outperformed, we have outperformed by a good margin the market recently. And my feeling is that there is still a lot of uncertainty and there are still a lot of issues which are not solved. There is this eurozone which is in turmoil. There is the sovereign debt which is not yet solved and if we have some good news from that front, I believe that we will be ahead of this number.
EBM : Maurice LÚvy, CEO of Publicis Groupe, thank you very much.
Maurice LÚvy : Thank you.