EuroBusiness Media (EBM): Trading update and new ratings, with Publicis Goupe, the world's fourth largest advertising company. Maurice Lévy, welcome, You are the CEO of Publicis Groupe. You've just announced that Publicis Groupe has been rated by the main rating agencies. What are your comments, and what do the ratings tell us about Publicis' financial situation today ?
Maurice Lévy (ML): We are very pleased to announce that we got investment grade rating from Standard & Poor's and Moody's, which was our objective. After their review, they granted us a BBB+ and a BAA2 rating and, for both of them, a stable outlook. This is very positive, it shows that we have a strong balance sheet and that people can trust our numbers. This is something that makes us very happy because we are coming out of a situation where we recently had a merger with BCom3, and all the effort that was made to lower our debt and to strengthen our balance sheet seems to have paid off, so we are quite pleased with this.
EBM: 2005 has been a record year for Publicis in terms of new business. Would you give us trading update today, and tell us what is your outlook for 2006 ?
ML: We have strong reasons to believe that we will top 6% organic growth in 2005, that we will probably have the second best performance of the market in terms of organic growth and, if you look just at the advertising agencies and media agencies, we will probably have the very best growth. We are quite happy with the performance. We are out performing the market and we are certainly showing a trend, since roughly the beginning of the year, which is consistently strengthening. In terms of margins, we have indications which show that we should normally improve our margin this year, which was one of the promises that we made last year. And when we look now at the outlook for 2006, the first indications we have for 2006 are quite good. We think that the new business that was won during 2005, plus the fact that 2006 is a market that looks like it is growing quite nicely because of the World Cup, and some other interesting aspects in the US and in Asia Pacific, all of this gives us the feeling that we will certainly outperform the market again.
EBM: A few months ago, you promised that by year-end you would restate your financial objectives to reflect the new IFRS accounting changes. As the year is now almost up, do you have any news for us on this topic ?
ML: Yes, we made a commitment. Or, if you prefer, we had an objective. But when we have an objective for me its a commitment. We announced to the market that in 2008 we would reach the level of 17% margin under French GAAP. We have restated these objectives in order to reflect the new IFRS rules and I am pleased to announce that we will be at 16 .7%. So the deterioration is very limited, it's only 0.3% margin points, which I think is quite reasonable.
EBM: Now that you have obtained an investment grade rating, will you be aiming to make significant acquisitions in 2006, or do you plan to buy back shares or convertibles ?
ML: I think that we will probably have two very important objectives in 2006. The first one is obviously to continue to strengthen our operations. So we intend to make some reasonable acquisitions. Well targeted acquisitions, in areas where we are rather weak or where we have to complete our portfolio of assets, or in regions where we believe there is some interesting growth. So acquisitions will continue. We have resumed our positions this year by making the Freud acquisition in the PR sector, then a solution in India. Now we will continue, and we have a few targets. The second thing that we will be doing is obviously to look at our balance sheet and to see how we can make some simplifications. There are some financial hybrids on which we would like to work. Now that the rating is behind us, we will make this a priority.
EBM: Investors are constantly looking for new areas of growth. How is Publicis positioned to take advantage of developing media markets such as Brazil or China, or even Asia in general ?
ML: The 'BRIC' market as we say -- there are some journalists who have called this the 'BRIC' market -- the BRIC markets are one of our main areas of development. We are already very strong in China, however we still want to grow in this country. We want to grow organically -- and we are -- and we also want to grow through acquisitions, and we are looking at some. We have done a pretty good job in India by strengthening our operations through solutions. But we also have the possibility of making some other acquisitions. We are looking also at Brazil. In Brazil we are number 2, so it's difficult to make some acquisitions there, but we are still looking at the possibilities -- though they are not great, to be honest. In Russia, where we have a relatively strong position, we are also looking at some acquisitions. The emerging markets are not limited to 'BRIC'. There are other markets, or there are some other areas or segments in our industry in mature markets which are growing very fast. If you look at healthcare for example, that is still growing very fast. And if you look at Internet obviously -- and I'm sure that this is something that interests a lot of investors -- we now see a rebirth of Internet. We are not yet back to the bubble era, but we see the market growing very fast.
EBM: By all accounts, internet in the media which will have the strongest growth rate in the next 5 years. What are Publicis' strengths in this area, and how do you see yourself as different from the competition on this segment ?
ML: Our strength in this segment is that we started very cautiously. So we have not been burnt by huge mistakes. We have made some, obviously, as have most of our competitors, but the way we have been burnt is very light, not something that leaves important traces or impairs our actions. We have done a lot of things. First we have strengthened dramatically Starcom Mediavest and Zenith Optimedia in the area of search and internet placement. It's difficult to measure because there are no statistics today, but we believe that we are probably among the top in this sector. Maybe number 2, maybe number 1, maybe number 3 - but we are in this bracket. If we look now in the other segment, which is the creative part, we have done a lot. We have strengthened our operations which are all profitable, which are growing very fast and which are very innovative. We will certainly announce very soon another initiative, in the US.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much.
ML: Thank you.
