EuroBusiness Media (EBM): Publicis Groupe, the world’s third largest advertising and communications group, reports full-year results for 2012. Maurice Lévy, welcome. You are the CEO of Publicis Groupe. What are your comments on your full-year results?
Maurice Lévy: We had a superb year, record year, the historical year of Publicis. We never had delivered such numbers. Be it on revenue, margin, net profit, cash flow, we have beaten all our hopes and expectations. And this, despite the fact that the market has not lived up to our expectations. While we were expecting the market to grow by about 5%, the reality that the market will finish by something below 3%. And we have seen what happened during the summer, where the market collapsed. Why have we been able to deliver such numbers? I think three elements. The first one, our strategy. Our strategy both in Digital and emerging markets, which we call now fast-growing markets. And this has given us some very strong position and very good growth. These two segments have grown by 6.6% while in some other area the market was negative. So thanks to our very strong position, which represents more than 50% of our whole business, we had that number. The second thing is that we have been able to change pretty quickly our strategy and to adapt to the situation of the market. The market was going down, we have made the right decision in order to protect our margin and to make sure that we would not be disappointing all our stakeholders. The last aspect is that while we were doing all this, we have at the same time protected our balance sheet and worked very hard on delivering an extremely robust balance sheet for 2013. So we are off a very good start for 2013.
EBM: Your figures showed some weakness back in September, how did things pan out in the fourth quarter: did you benefit from a phasing over from Q3 into Q4, or did Q4 see a true underlying acceleration?
Maurice Lévy: Q4 was a moment of danger because, as always, November/December are months of adjustment for some of our clients. It happens that we have been able to win a few more contracts. We have been able to win some Digital operations and, despite Sandy, which has impacted negatively our numbers in the US, we had a very good fourth quarter, with a growth, organic growth, which was close to 4%. So we are extremely pleased. We announced, by the way, growth for October which was slightly ahead of 7% and we are completing the year with organic growth of 2.9% for the full year and close to 4% for the fourth quarter. Moreover, what I would like to stress is that if you look at the region, all our regions are positive. None is negative in the fourth quarter, including Europe, which is showing a lot of weaknesses, as we know.
EBM: What are the main trends that you are seeing by geographical zone?
Maurice Lévy: We are quite pleased with the evolution of the US. We believe that consumer confidence is good and we think also that the situation of most advertisers is very good and they should be able to keep up with investment and to grow their business. Regarding the emerging markets, a lot of solutions have been found and growth is back. So we feel that those markets will normally be in a better trend than last year. The sick child of the world is clearly Europe. And Europe is facing a lot of difficulties. There are some countries which are doing slightly better, but all in all, we are expecting Europe to decline in advertising spend and we believe that the situation will be quite difficult in the advertising world. We are, ourselves, in a better situation than many of our competitors. As we have invested very early on in Digital, and we have a disproportionate share of our business in Digital, we expect to offset the decline of the analogue media by the digital media and the acquisition that we have made recently. So we feel quite good despite the doom and the gloom of Europe.
EBM: What are your comments on the competitive environment, and are you feeling pricing pressure?
Maurice Lévy: Yes, definitely. All our clients are feeling themselves some pressure and they are reporting that pressure to us. So we feel clearly the pressure on price and the good answer to that pressure on price is twofold. One, obviously, is that we have to meet the client expectation and to try to find ways to satisfy their needs. And by the same token, we have also to increase the quality of our services, to develop state-of-the-art innovation, technology, in order to increase our revenues. So I believe that by dealing with the two issues we give satisfaction to the client, we create new services, with more innovation, more development. We adapt ourselves to this new environment and at the end of the day, as you can see through our numbers, not only we satisfy our client, but we do a good job for our company and our shareholders.
EBM: What is your outlook this year? At least one of your large competitors has described 2013 as identical to 2012 minus the Olympics. Do you share that view?
Maurice Lévy: You know, we are looking at the world not through the eyes of any of our competitors, but we are looking through our own eyes and the eyes of our clients. And we prefer to watch what our clients are doing rather than what our competitors are thinking. And what we see currently is that 2013 will be more difficult than 2012. It will be more difficult in many areas, and particularly in Europe. Suffice to see the difficulties to come to an agreement in Brussels, suffice to see the difficulties on social environment, the fact that there are many factories which are closing, not only in France but in Spain, in Italy, in the UK. So we see that the situation is not great in Europe. So, when we look at this environment we can think, “OK, this will be a year which will be worse than 2012”. From a Publicis standpoint, we believe that we will do better than 2012, that we will not only beat what we have delivered, but we have decided for internal objective which are higher, not only that the market growth which is expected to be today at roughly 4%, which will probably decline a little bit, but we want to beat average market. And we want to beat last year. So, on growth, we believe that we have the resources, that we have the ability to do a very good job. We should not forget today the first segment of asset and activity of Publicis Groupe is Digital. 33% of our business is originated from Digital and it is before the creative agency, which are 30%. And next year, 2013, it will be at 35%, widening the gap. And we want to increase that gap and to get to the 50%. This is something which is a very strong decision and I believe that this will help us to deliver what we expect. The second pillar of our strategy is emerging markets. On emerging markets — or fast-growing markets — we have close to 26-27%, and we expect to grow that position in 2013 and we expect to bring it to 35% down the road. And when you combine all these numbers you know that we are in a position to really make the best of 2013 in growth. On margins, we want also a slight improvement on the 2012 margins, which were at 16.1%, improved from last year, and we want to make a further improvement in 2013.
EBM: What is the medium to long-term outlook for the advertising buying business? We're hearing a lot about ad exchange platforms — will they completely revolutionize the media buying part of your business?
Maurice Lévy: There are a lot of innovations going on and we have ourselves the buying platforms and there are buying exchanges and there are a lot of platform that exist on the market and they think that there will be a clarification of the market down the road. How much time it will take before we know exactly what will happen? Maybe 3 to 5 years. What we do is to be state-of-the-art in this field also. We believe that our media agencies are among the very best of what exists in the market. They are extremely sharp, with absolutely brilliant people and we are doing an extremely good job. So I’m totally confident that media will be one of our growth segments and growth engine for the future.
EBM: Are you planning any more acquisitions in Digital? Would you prefer that they be small and targeted, or possibly larger and transformational? Or would you rather prefer to focus on internal recruitment to grow your digital activities?
Maurice Lévy: It will be a little bit of both, if I may. We will continue to recruit and to recruit talent in order to strengthen our agencies. Digital at Publicis is not only in the digital agencies. We have Digital in the media agencies, we have Digital in the PR agencies, we have Digital everywhere and obviously in the creative agencies and we have superb Digital assets in all these creative agencies. So Digital will be part of everything we do. That is one thing that has to be extremely clear. It’s not only in the Digital agencies and the specialised agencies that we have. On that front, we have decided the acquisition of LBI, that we have merged with Digitas, which is probably your next question that they’re going to cover now, and because this is giving us a very good profile, because we will have the number 1 network pure player Digital in the world with the best coverage; 25 countries; 5700 people, and we will need to strengthen not only the networks but also the other operations. So we will have some acquisition in Digital. Transformational, honestly, I don’t know. I don’t know if there is an opportunity and we will look if there is an opportunity, but we’ll obviously analyse the pros and the cons. One thing is certain. Everything that we are doing, we try to do it having in sight the necessity of a great integration. And that is an absolute necessity. It’s a must. If we can integrate positively and for the benefit of our clients and the benefit of our people and the group, we make the acquisition. If we can’t, we prefer to pass. And we did in the past.
EBM: Some analysts are struck by your decision to merge LBI with Digitas, figuring that it's often hard to get agencies to work together, and surprised that you did not prefer to merge LBI with Razorfish or even VivaKi instead. What do you hope to achieve by merging LBI with Digitas?
Maurice Lévy: I think I need to clarify the concept of merging for the analyst investors, and more importantly, if I may, for the clients and our own people. The beauty in this merger is that both networks are totally complementary. There is almost no overlap, and we can really create a powerhouse in Digital which doesn’t exist in the world. With Digitas/LBI, we have a pure player which will be the largest and the most complete network in the world. So the clients will have the possibility of combining some of our agencies with either Digitas/LBI or Razorfish, or we’ll have the possibility of using one of the networks according to their needs and what they would like to have with us. So we are offering a portfolio of assets which aim to be extremely strong in each of the segment of the business we operate in.
EBM: What can you tell us about plans to increase the pay-out ratio and the dividend? You kept the dividend flat while some competitors have increased theirs — why did you choose dividend stability last year?
Maurice Lévy: In 2012, we kept the dividend flat at €0.70 cent per share. But at the same time, we have made a buy-back of shares and we have cancelled the shares from Dentsu for €644 million. So I think that our shareholders have been well treated in 2012. In 2013 we are increasing the pay-out slightly, from 23.6 to 24.5, which is a small improvement, but we are increasing the dividend by a big leap, because we are moving from €0.70 to €0.90 per share, which is an increase of more than 28%. So the dividend will increase by more than 28%, I think it’s good news for our shareholders.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much.
Maurice Lévy: Merci.
