Publicis upbeat on 2013 despite Europe woes

PARIS Tue Jun 12, 2012 12:26pm EDT

Maurice Levy, French advertising group Publicis Chief executive, attends a Reuters Global Media and Technology Summit in Paris June 12, 2012. REUTERS/Mal Langsdon

Maurice Levy, French advertising group Publicis Chief executive, attends a Reuters Global Media and Technology Summit in Paris June 12, 2012.

Credit: Reuters/Mal Langsdon

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PARIS (Reuters) - Advertising agency Publicis (PUBP.PA) is optimistic about marketing budgets for next year despite the ongoing drag from Europe's debt crisis and the lack of major events such as the Olympic Games, Chief Executive Maurice Levy said.

The veteran chief of the world's third-biggest ad agency, which competes with WPP (WPP.L) and Omnicom (OMC.N), acknowledged that Greece, Spain and Italy faced deep economic pain, but said he believed political leaders would avoid contagion infecting the entire common currency zone.

"I see 2013, for the time being, quite positively," Levy said at the Reuters Global Technology and Media Summit.

"Our clients' plans for next year as we see them today, although not finalized, put us on course for a stronger 2013 than 2012, even without the boost from the quadrennial events including the U.S. elections and Olympics."

Levy's cautious optimism for next year contrasts with the more downbeat message from arch-rival Sir Martin Sorrell, CEO of WPP, who has said 2013 could prove difficult.

According to forecasts from ZenithOptimedia, which is owned by Publicis, global ad spending should grow by 5.3 percent in 2013, higher than the 4.8 percent expected in 2012.

For this year, Levy confirmed that Publicis was seeing the slowdown in the second quarter demand that it had earlier predicted, but still predicted improvement in the second half of the year as Olympics ad budgets came through.

"For the time being, the U.S. market is the most in line with the first quarter and maybe slightly superior in the second quarter," he said.

"Europe is the region that is suffering the most, and we are seeing some signs of deceleration in the growth in emerging markets like China and Brazil."

Levy said advertising of consumer goods and technology and was holding up well, with telecom helped by battles between the likes of Google, Apple and Samsung. In contrast, the automobile and pharmaceutical companies were "suffering", while banks were also slowing spending.

Major advertisers like Coca-Cola, P&G and MacDonalds were gearing up for the London Olympics this summer, attracted by the wide audience and Europe's time zone that meant that broadcasts can be seen live in the U.S. and Asia.

"The Olympics will be very good for business and we should see higher ad spending than the last games," Levy said, adding that the benefit would be seen in the third quarter.

The expected pick up in the second half of the year led Levy to maintain Publicis' objectives for organic growth faster than the market and stable margins for 2012.

He declined to comment on the outlook for margins beyond this year, but hinted that Publicis was working on a series of new products and services that would allow it to accelerate growth and boost profitability.

"We are developing a new strategy, which should bear fruit for the future," said the CEO, declining to provide further details or timing of an announcement.

"I'm personally confident that we will have opportunity to grow faster ... and improve margins."

Analysts have questioned Publicis' ability to improve its profit margins, which were 16 percent last year, after several years of improvement based on an expansion in digital ads and emerging markets.

Such concerns have caused Publicis to underperform WPP shares, with the French group up nearly 6 percent since January while WPP rose 13 percent.

Natixis analysts wrote in a recent note that despite Publicis' ongoing efforts to cut costs, margins would remain under pressure from higher staff salaries and the need to invest in digital and online ads.

For his part, Levy remains upbeat about the future although preparations to find his successor after 25 years at the helm of the ad group were set to begin this summer.

"I believe there is enough great talent within Publicis to not look outside," he said.

The board will begin its official process of examining candidates this summer, although Levy said it was hard to tell how long it would take to complete.

"There will be a succession. No, I will not stay until I die. I will die elsewhere."

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(Editing by Jon Loades-Carter)

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