EuroBusiness Media (EBM): Publicis Groupe, the world's fourth largest advertising company, just reported full-year profit for 2006. Maurice Lévy welcome, what are your comments on the operational and financial performance of Publicis in 2006?
Maurice Lévy (ML): To put it in a very simple way, we had a record year. Not only a record year for Publicis, but I think a record year for the industry. Margins rose to the level of 16.3%, a level that has never seen before in the industry. So it's a great success and we are very happy. We delivered 544 million euros of free cash flow, which is up by 14% and we have our debt level which is down by 31%. So all in all, I think we can say a great year, after having posted a 5.6% organic growth.
EBM: What is your update on the integration of your recent acquisition, Digitas, which seems to be less a story about cost synergies, that a story about tomorrow's growth. So to be specific, are you encountering success bringing Publicis' client portfolio to the Digitas offering?
ML: We never made an acquisition for cost synergies. We don't believe that this is something that adds an interesting aspect to our offering. When we are making an acquisition, it is always for strategic reasons. Digitas is not only a story of growth, it's a story of changing, quite dramatically, the position of Publicis in the world of communication agencies. What we want to do, what we want to achieve with Digitas is a thorough shift in our positioning .We believe that the world will become more and more interactive, that the need for interactive services will grow faster and faster and we think that the Publicis group must become an all digital operation. Digitas will help us to do that. Digitas is already introduced to some of our clients. It's too soon -- the acquisition was only completed a month ago -- so it's too soon to know what will be the end result, but what I can tell you is that the clients are welcoming Digitas in a big way.
EBM: More generally, beyond Digitas, can you provide us with an update about your level of digital sales which is the 'hot button' topic in your industry today?
ML: We have a level which is roughly the same as the rest of our operations before Digitas, which is in the region of 7 to 8%. We are doubling this level with Digitas. So we already have a position which is seriously different from our competitors. And our objective is to continue to raise that position and to increase our footprint in the digital field, in order to reach the level of 25% of our revenues in 2010.
EBM: At the beginning of each year you usually provide the market with an outlook of the trends in the year to come, by geographical zone and by industry sector. So, what are the main trends that you foresee at the beginning of 2007?
ML: We have the feeling that the year will not be very different from the former one. We will have a year 2007 which will be roughly the same direction as the one we have experienced in 2006, with maybe a slight change in the balance of the growth between Europe and the US. The combined operations should deliver about the same growth, but probably we will see the US growing less fast than last year and Europe a little bit faster than last year. If you look at Asia, we still see the incredible speed of growth of the Chinese - we don't know who can stop them - and the Indians are moving fast. There is also a spot that is interesting to watch, which is Russia. Those are the big differences compared to last year. If we look now to the Publicis group, it's hard to say, we think that we may well this year also outperform the market, at least it's our objective.
EBM: Precisely, what kind of guidance can you give the market today about your expected business performance in 2007?
ML: I hate to give guidance to the market, because when you start you never know when you should stop, or where you should be stopping, but I would like to say to the market and to investors that we are very confident about our performance. We started the year with some very good news - almost 2 billion US dollars of new business. We have some very good contacts in the pipeline, we have also some very good improvements in our operation, so all in all we may very well again surprise nicely the market. We have an interesting challenge, as always, which is the integration of Digitas. Until now we have a success story in terms of integration, what we have done so far has been absolutely successful. 2007 is the year of integration for Digitas. Everything we have to date as information is confirming our strong belief that this will be a formidable acquisition and a formidable success.
EBM: After Digitas, what are the next steps we should expect in your acquisition strategy - more digital media targets or perhaps a play in market research?
ML: We are focusing our objective on the emerging market. I know it's very hard to find some interesting acquisitions in this market. We're trying hard and we are looking at a lot of opportunities. I hope that some will be confirmed in the months to come. We are also interested obviously in interactive, in mature as well as emerging markets. This is even harder. We will be opportunistic, because if there are some acquisitions that are interesting and that are a little bit out of scope, we will look at that. We don't feel we have a strong, urgent need to make acquisitions. We are moving at our pace, we are very cautious, because if you want to be successful in an acquisition, we have to make sure that there is a fit with our own operation, particularly in terms of culture, but also obviously in terms of clients and how we are managing the operation. All these are the ingredients of the success. Until now, knock on wood, things are going well.
EBM: Before Digitas, the market was wondering whether you were going to favour growth over margins. Given that Ditigas has higher growth but lower margins than Publicis, should we consider that you have given the market an indication of your preference for the near future?
ML: When you like both you cannot choose! I like growth, I like good margins. I think good margins are indispensable. Not only for the quality of our relationship with our investors, but also for conducting our businesses. We believe that strong margin is what helps us to build our future, to invest and we will protect the strong margins. If you look at the history of our acquisitions, we acquired a lot of operations which were much below the level of Digitas, and due to some 'magic touch' and some good ingredients, such as our shared service centres, such as the IT services, etc., we can find ways to improve the margins of our acquirees. So we look at Digitas as a growth engine, we believe that Digitas will grow, not only in the US where they are a leading operation, but also throughout the world thanks to our own operations and those operations that we may buy down the road. So we will definitely favour growth AND margin.
EBM: Lastly, the market, which thinks you can now afford to have a higher dividend pay out ratio, would like to know your strategy in the near term, concerning the return of cash to shareholders
ML: We are giving the shareholders an indication immediately, because we have raised our dividend by 39% and we are increasing the value of the company by the acquisition of Digitas. So these are two very strong indications. Again it's not a choice, it's 'and and'. We do acquisitions AND we improve the relationship and the return to the shareholders. What we would like to do is to continue in that direction. This is something that has been clearly indicated to the market for years. And if you look at the history, we have been improving our payout slightly, not so much to be honest - this year it will be close to 25%, 24% exactly. We intend to move in that direction and to continue to progress. But if you look at the dividend per share, it has improved by 39%, which is already 100 million euros, which is a nice cheque to be signed.
EBM: Maurice Lévy, CEO of Publicis group, thank you very much.
ML: Thank you.