EuroBusiness Media (EBM): Publicis Groupe, the world’s third largest advertising and communications company, reports revenue for the first quarter of 2011. Maurice Lévy welcome, you are the CEO of Publicis Groupe, what are your comments on the group’s performance in the first quarter? Was the growth momentum of the fourth quarter of 2010 sustained into the first quarter of this year?
Maurice Lévy (ML): On the back of an exceptional year in 2010, we have enjoyed a very good first quarter and despite comparison bases which are not favourable to us, due to the fact that we have outperformed the market last year, we are posting a growth which is at 6.5% organically, 10.7% increase in our revenues, and this is something which is slightly ahead of our internal plans. We were not expecting to be at this level, so we are very pleased with what we are seeing and we believe that this is a very good performance.
EBM: What are the main trends that you observe by geographical zones today?
ML: What is very interesting in the numbers that we are posting are the numbers regarding the US. We know that the US market is going better and picking up, but we are posting above 8% organic growth in the US, and as it is the largest global market, you can imagine that the impact is very good for us. This has been fuelled mainly by new business, that is the good aspect of Publicis Groupe – you can always expect that the new business machine is working well, as we have seen recently – and also by Digital. We have chosen, as you know, since a while, to invest heavily in the digital space and we are really very happy with what’s happening and we have this organic growth which we believe will continue for the full year. So the US has been excellent. Europe has been very good, despite the fact that it is contrasted, but we see that the big machines, like Germany and France, are doing extremely well. France is above 8%, but Germany is at double digits. And the only serious negative market is still Spain, for which we believe that things will move in the right direction pretty soon. So Europe has been good. The disappointment, if any, is coming from APAC. Not so much from Greater China, where we have a growth which is above 8% – 8.7% exactly. The problem is coming, as one can expect, from Japan, but also from Australia. There are some issues due to the problem that Australia has faced recently and there are a lot of advertisers who have stopped investing for a while. I believe that we are not the only ones facing some problems. We have a specific problem in Korea, where our largest client is waiting for a merger authorisation and therefore investment has been frozen. So this is just a phasing issue and we believe that this will be positive pretty soon. And we have a specific problem in Thailand, and this has impacted the region. But what’s good is that China, which is our main driver for the future, is doing well. In Latin America, the numbers are very good. Very good, with double digit numbers in countries like Brazil, Argentina or Venezuela. So this is very positive. And we think that we are well off in the region. Also, as everyone can expect, Africa and Middle East is a little bit troubled, and growth in this region is impacted by the fact that in Egypt there is not much to... Saudia Arabia is slowing down seriously for a while and, I guess, this will continue for the next quarter. And otherwise, when you look at the other countries, things are picking up nicely.
EBM: You just mentioned Brazil, where you recently took over the majority stake in the Brazilian agency, Talent, which will now be fully consolidated. What can you tell us about the promise of this acquisition?
ML: We are very pleased with the year 2010 and what we have seen during the period when we were a minority holder. In the initial agreement, it was planned that we would move to a majority – this happened now – and the numbers of Talent will be consolidated in the Publicis numbers from April 1st. So all this is very good. What is interesting is that Talent is a talented agency. Easy to say, but it’s a real talented agency! There is a drive, there is plenty of talent, they are doing extremely good work and they are growing. The second aspect is that Talent is not only one agency, it’s a Group. And as part of the Group, there are operations which are helping advertisers in the field of promotion and activation. And that is something which is very important, because we believe that this specific operation that we have in Talent is something that will be an offering to the clients of the group – so the Publicis clients, the Saatchi clients, the Leo Burnett clients – so all this is something which will bring some very positive synergies and we are very pleased with this acquisition. I will be going to Brazil soon and I will celebrate there.
EBM: Are you at all concerned, as some pundits are forecasting, that fast-moving consumer goods companies, who are under pressure from rising commodities prices, may seek to preserve their margins by cutting their advertising spending this year?
ML: Despite the issues, I don’t believe that this is going to happen. All the advertisers who have played with advertising spending in order to protect their bottom line have paid a huge price for this in losing market share, and the cost to regain market share is prohibitive. Therefore, I don’t think this will happen, or at least if it does happen, it will not be with big magnitude. What I do know is that for the time being, looking at all my forecasts, I have no sign of budget cuts.
EBM: There have been some press reports lately about the possibility of you buying back the large stake that Dentsu holds in Publicis Groupe. Where do we stand on this today?
ML: The decision to sell or not to sell is a Dentsu decision. And Dentsu has plenty of time to make its own decision and we will respect the decision, whatever it is. The only thing I can say is that if, by chance, Dentsu decided to sell all or part of the shares, we will be the buyer of these shares and we will cancel them.
EBM: And finally, what are your next big growth projects for Publicis Groupe?
ML: We have proven that the strategy is working. And our strategy is to focus. And I’m using the word “focus” because it is very important. We are not going to do a lot of things. We have a clear focus on Digital and Emerging Markets. And our strategy is clear. We will strengthen our digital operations in order to make rock solid the fact that we are ahead of the market by a mile. So this is something that we want to pursue and we will. The second aspect is on Emerging Markets. We have proven to be reactive in Brazil, we are reactive in China and we have a plan to double our size in China in the next three years. We have very good results in Russia and the next to be looked at is India. At the same time, we are not forgetting the Next Eleven and we are looking at each of these markets specifically in order to look at what are the countries in which we should have a clear advantage in investing early on. That is our strategy. Nothing else.
EBM: Maurice Lévy, CEO of Publicis Groupe, thank you very much.
ML: Thank you.
