Lévy Takes Stock

Some 400 Publicis Groupe shareholders gathered last Tuesday at Publicis Drugstore’s cinema on the Champs Elysées in Paris to hear CEO Maurice Lévy salute the company’s integration of Bcom3 as “undoubtedly the most important achievement of the year 2003.”

Joining Lévy was the chair of Publicis’ supervisory board, Elisabeth Badinter, a major shareholder and the daughter of agency founder Marcel Bleustein-Blanchet.

Lévy outlined the steps involved in integrating the former Bcom3 into Publicis. The Paris-based holding company created a new corporate management team last year, with executives representing agency networks such as Leo Burnett, Publicis and Saatchi & Saatchi. Publicis also dissolved Bcom3’s top management structure and dismantled its D’Arcy network, distributing its assets among other corporate units.

The company’s healthcare operations were reconfigured into a new entity, Publicis Healthcare Communications Group. Marketing services were reorganized, with the creation of Arc North America and the strengthening of resources at Publicis Dialog. Publicis also bolstered its media agencies, buying minority stakes in Starcom Motive and ZenithOptimedia.

Lévy said other significant achievements in 2003 were the company’s return to organic growth, the continued improvement in its operating margin and the strengthening of its balance sheet. Organic growth rose 2 percent last year, compared with a drop of 3.9 percent in 2002, while Publicis posted a 15.3 percent margin in the second half, exceeding its 15 percent-margin goal. (For the full year, Publicis’ operating margin was 14.3 percent.)

Publicis said its balance sheet was bolstered by “significantly enhanced” working capital in the second half. During that period, Publicis generated an inflow of $534 million. For the year, the company posted an inflow of $278 million, after recording an outflow of $256 million in the first half, shareholders were told.

Publicis reduced debt from $1.6 billion on Dec. 31, 2002, to $1.4 billion at the end of 2003. Its debt peaked at the end of second-quarter 2003, at $1.9 billion. Refinancing efforts, begun in 2002, continued last year: The company raised $807 million of an “Oceane” convertible issue, with a maturity date of five years, and signed a three-year syndicated credit facility of $841 million. Publicis said total credit facilities available on Dec. 31, 2003 were “in excess of” $1.2 billion.

Among other highlights cited by Lévy was the strategic alliance with Dentsu, which led to the development of sports-marketing firm iSe, 45 percent-owned by Publicis, 45 percent by Dentsu, and 10 percent by Sports Mondial. iSe has won the hospitality business for the World Cup in 2006 in Germany and has responsibility for marketing the TV rights for the 2004-06 Toyota Cup outside Japan.

In 2003, Publicis also took measures to simplify its shareholder structure by merging three ownership entities into Publicis Groupe, with voting rights, as of Dec. 31: Badinter, with 18.8 percent; Bcom3 shareholder Dentsu, 16.6 percent; and public shareholders, 64.6 percent.

Lévy applauded the company’s new- business efforts in 2003, which brought in $4 billion in new billings from companies such as Allied Domecq, Cadbury, Minute Maid and Pfizer (Zoloft and Celebrex), and the awards performance of its agencies, which also include Fallon and a stake in Bartle Bogle Hegarty. Publicis came in second at the Cannes Advertising Festival, trailing Omnicom, in the number of points scored and Lions won.

Shareholders passed a resolution to increase Publicis’ dividend from 28 cents to 31 cents a share.

Terms of six Publicis board members were renewed: Les Ecrais de Paris chair Sophie Dulac, niece of Badinter and granddaughter of Bleustein-Blanchet; Hélène Ploix, chair of Pechel Industries; Monique Bercault, technical consultant to the president of Média & Régies Europe; Michel Cicurel, chairman of the management board of Compagnies Financière Edmond de Rothschild and Compagnie Financière Saint Honoré; Amaury-Daniel de Seze, chairman of COPEBA (Belgium) and chairman of PAI Management SAS (France); and Gerard Worms, managing partner of Rothschild & Cie Banque.