Publicis Investment

A SIMPLE STOCK IDEAA SIMPLE STOCK IDEA

9th Value Investing SeminarTrani, Italy - July 2012

Don Fitzgerald, CFA

Fund Manager, Tocqueville Value [email protected]

MY STOCK IDEA:

� High Returns (Capital / Margins)

� Sustainable Returns

� Growing Business - EPS growth 15% p.a. since 1994

� Solid Management

2

� Solid Management

� Soft Cyclical

Highly Liquid Large Cap………….trades at 7x EBIT

MY STOCK IDEA IS

3

MY STOCK IDEA IS:

4

MY STOCK IDEA:World’s 3rd Largest Advertising Agency Group

5

� Listed: Paris� Market Cap: EUR 7 billion� ISIN: FR0000130577� Free Float: 90% - Daily Volume EUR 30m

MY OWN ADVERTISING

Ranked 10th/108 in category since inception (from 31/03/00 to 30/06/2012)

6

Source: Europerformance

PUBLICIS BUSINESS OVERVIEW

Source: Publicis data 7

PUBLICIS BUSINESS OVERVIEW

Source: Publicis data 8

56%26%

18%

EBIT BY REGION ( FY 2011)

PUBLICIS BUSINESS OVERVIEW

9

26%

North America

Europe

Rest of the world

Source: Publicis Data

PUBLICIS BUSINESS OVERVIEW

Source: Publicis data 10

PUBLICIS BUSINESS OVERVIEW

11Source: EXANE BNP Paribas

� Fastest growing media segment (market growth + 10%)

� Share of Client Spend accruing to Agency rises

� Margins Similar to Group Levels

DIGITAL OPPORTUNITY

12

� Publicis Early Mover

DIGITAL NOT THREAT

� Dis-intermediation Limited Risk

• Fragmentation and Complexity of Multimedia World

• Advertisers want Choice

131 I = Intelligence, Insight; T = Technology; E = Emotion

• IQ + TQ + EQ1 = Success

HIGH RETURNS - CAPITAL

11

12

13

14

15

16

17

Pre-Tax ROCE (%)

14Source: Tocqueville Research

8

9

10

11

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

� Cash conversion > 100% - capex light / negative operating

working capital

HIGH RETURNS - BEST IN CLASS MARGINS

EBIT MARGIN (%)

11

13

15

17

15Source: Bloomberg data

* WPP plc, Omnicom Group, Interpublic Group, Havas SA and Aegis Group plc

3

5

7

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

PUBLICIS

Average

Competitor

�Need Scale, Global Reach, Client-dedicated Resources

� Oligopoly – 4 Global Agency Groups – No New Global

Network for last 20 years

HIGH RETURNS SUSTAINABLE

16

� No Long-term contracts but 90% retention rate

� Well Positioned in Digital

� Balance of Creativity and Analytics

� Strong at Integrating and Retaining Talent

HIGH RETURNS - COMPETITIVE EDGE

17

� Balanced Global Exposure

GROWS PROFITS – TRACK RECORD

2,5

3,0

3,5

EPS (EUR)

18

1,0

1,5

2,0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Source: Company, Tocqueville Research

GROWS PROFITS – SOME TOP-LINE GROWTH

-2

0

2

4

6

8

10

ORGANIC SALES GROWTH (%)

19

� Consistently outperforms competitors on organic growth

� Top-line growth driven by digital (30% of revenue) and emergingmarkets (20% of revenue)

Source: Tocqueville Research

-8

-6

-4

-2

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

GROWS PROFITS – MARGIN PROGRESS

15%

16%

17%

18%

EBITA MARGIN Medium

term

target 18%

Upward Trend

20

� Structurally Margin Improvement driven by

• Scaling of Digital

• Streamlining / Off-Shoring

12%

13%

14%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Tocqueville Research

Upward Trend

SOLID MANAGEMENT

� Genuine Culture Commitment to Digital & Globalization

� CEO Levy – IT Background

� Key Person Risk

21

� Leveraging Global Clients with Acquisitions

� Post Investment Cycle more Shareholder Returns (net debt /

ebitda – 0.5x)

� Topline

• 60% of Sales from Defensive Sectors

� Costs

SOFT CYCLICAL

22

• Staff Turnover 20%

• Discretionary Costs (incentives, freelancers) 7% Revenues

Margins Stable through the Cycle 15% - 17% EBIT

� No Asset Backing

� 7x 2012 EBIT

VALUATION

23

� High & Sustainable Returns

� Well Positioned to Grow

� Well Managed

� Mild Cyclical Exposure

CONCLUSION – MY STOCK IDEA…

24

� Mild Cyclical Exposure

� Modest Valuation

…IS A GOOD IDEA

ENJOY YOUR TIME IN TRANI

25

DISCLAIMER• This document is strictly confidential and for the use of intended recipients only. It may not be reproduced,

communicated or published in its entirety or in part, without the prior written authorisation of Tocqueville

Finance S.A.

• This commercial document should not be interpreted as a contractual or pre-contractual commitment on the

part of Tocqueville Finance S.A. It is produced purely for illustrative purposes and may be amended at any time

without previous notice.

• The information/analyses contained in this document, particularly figures, have come partly from external

sources considered to be trustworthy. However, Tocqueville Finance SA cannot guarantee that the

information/analyses are complete, accurate and up-to-date.

• Tocqueville Finance S.A. draws investors’ attention to the fact that past performances are presented on the

26

• Tocqueville Finance S.A. draws investors’ attention to the fact that past performances are presented on the

basis of figures relating to previous years and are not an indication of future performance.

• Moreover, Tocqueville Finance S.A. in no way guarantees the current or future performances of funds cited in

this document

• Investors are reminded that any financial investment includes risks (market risks, capital risk, foreign

exchange risk) that may result in financial losses. Therefore, Tocqueville Finance S.A. recommends that prior to

any investment, the recipient of this document carefully reads the prospectuses of the cited funds which are

available free of charge at its head office located 8 rue Lamennais, Paris 75008 or on its website

www.tocquevillefinance.fr and ensures that they have the experience and knowledge needed to make an

investment decision, particularly with regard to the legal and tax implications.