EuroBusinessMedia (EBM): Publicis Groupe, the world’s fourth largest advertising company, reports revenue for the first quarter of 2009. Maurice Lévy welcome. You are the CEO of Publicis Groupe, what are your comments on the level of growth in the first quarter, which was tougher than expected for the advertising industry as a whole?
Maurice Lévy (ML): As you know, the market started to deteriorate last year and since the month of September we have seen regular deterioration of the market. The last forecast is -6.9% for the industry for 2009. Our main competitors have published their numbers. What we see is that they are between -5.8% to -6.6%, which is where roughly the market was expecting Publicis because they were expecting at the lower end, at -5.5%. While I’m not happy to show a negative number, because it’s not nice to show a negative number, the organic growth of Publicis has been -4.4%, compared to -5.5%, the market consensus on Publicis, and -5.8% to -6.6% from our main competitors. This shows clearly that we have won market share. This shows also very clearly that our strategy, which was to invest massively on digital, has been bearing fruit, and also that our footprint on emerging markets is protecting our growth. So all in all, without being totally satisfied, I must say that we have limited the impact of the deterioration of the market.
EBM: Are you seeing any noteworthy differences across sectors or client types in the midst of the slowdown?
ML: We have suffered from the automotive industry, but this will not be a surprise. We were expecting to suffer. We have suffered more than expected and this sector is down by 20%. So it was representing 15% of our revenue last year and it is down to 13%. The rest is holding up quite well and we have more than 50% of our clients and sectors which are in the growing sectors.
EBM: How well is your digital business holding up in the current environment?
ML: We are very pleased with our strategy in digital. Not only do we have an organic growth, which is close to 10%, and the total growth of our operation at constant exchange rate is 13.3%, so we are really very happy. It shows clearly that this was the right strategy, and we see more and more clients going digital. And by the way, as we know, the forecasts that have been delivered by Zenith Optimedia, as well as our competitors, show clearly that the analogue media will suffer a lot, and we expect this to last for a long period of time, while digital is still growing. And we believe that digital will grow at least by 8 to 10% in the next two years.
EBM: Emerging markets are now affected by the slowdown as much as developed economies. What's your view of the situation in the emerging geographies?
ML: I would certainly not say that the emerging markets are affected as much as the mature economies, at least as far as we can see in our own numbers. The total organic growth is -4.4% for Publicis Groupe, while total emerging markets is -0.9%. So you see that there is a noticeable difference. We see some markets which are doing extremely well, growing in double digits: Eastern Europe 14%, Turkey 26%, and many other markets which are growing. We see also some negative growth. And particularly we see that China has been a little bit constrained in its investment in the first quarter, while every indication we have is quite positive for the future. So in total, the idea of investing in emerging markets was good, and when we look at the numbers as they are today, we have benefited from those investments. So we are very pleased with the situation as it is. What would be the issue in the future? Probably that China will go up, but also that Russia will probably stop growing and maybe decline a little bit.
EBM: And lastly, at the end of this first quarter, what is your updated outlook for the rest of the year?
ML: We have not given any guidance and we are not going to give any guidance. What we can say currently is roughly three or four things. The first one is that the forecasts for the market are not very good, -6.9%. We believe that the second half of the year will be better than the first half and we think that the negative peak will be during the summer – June, July. So we believe that we will see some improvement in the situation in the second half and that probably recovery will be in the middle of next year, with positive numbers. This scenario is something which is confirmed by everything that we are hearing from the IMF, the World Bank and all the forecasts which are given by these institutions. The second thing we can say is that, clearly, analogue media will suffer and that the name of the game for us will be gaining market share, as far as revenue is concerned. And we are today holding up quite well with new business which is very strong. We were number one in 2008, we are number one - widening the gap with our followers - in the first quarter of 2009, and the month of April looks very good as far as we are in demand.
What we will need to do, and what we are working very hard on, is obviously our cost structure. As you know, we have the best margin of the industry and we’ll work very hard to keep that high level of margin and to maintain - even if there is some erosion of our margin due to the current situation - a very important gap with our competitors. What we are doing is, obviously, working very hard on the costs. We have taken a few decisions since last September, particularly on freezing hiring. It’s not a total freeze, we try to do it in a clever manner in order to continue to best serve our clients and to stay highly competitive, and we are adjusting where it is necessary. We are also doing a lot of work on cash management in order to improve our cash situation.
So all in all, what we would like to achieve for 2009 is, in fact, four very strong objectives. The first one is to best serve our clients, because this is the key. The second is to continue to grow through new business. This is the real measure of our competitiveness and today we are clearly ahead of the competition. The third is to control our costs in order to protect our high-level margins. And fourth is to protect the healthy financial situation we have and to manage cash in the best possible way.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much indeed.
ML: Thank you.
