Publicis Groupe SA (PUB), the third- largest advertising company, has let business units freeze hiring to avert layoffs and has seen a “leakage” of spending from worried clients, Chief Executive Officer Maurice Levy said.
Customers’ budget cuts aren’t large and a hiring freeze that began in some parts of the company in July was meant to prevent layoffs, Levy told reporters at a Morgan Stanley conference in Barcelona today. The company’s margins will be flat to slightly up for 2011, he said.
Levy said he is happy with the performance of the company’s digital business, which is in the running for more new projects than it has the capacity to handle, and he has “a dream” of reaching 20 percent margins in the next several years.
“We have a pipeline like never before in terms of new business,” Levy said. “If we had to win only 60 percent of the pitches, we would have a hard time in delivering because of a shortage of talent.”
Margins should improve over time as businesses the company has acquired fall in line with profitability in the overall business, Levy said. Publicis has said it will scale back purchases and stockpile cash in anticipation of a potential share sale by Dentsu, which represents more than 9 percent of the company’s stock.
Dentsu will let the company know about its decision by June, Levy said. If the Tokyo-based advertiser sells, Publicis will buy back the shares and cancel them. If Dentsu stays on, Publicis will return the cash to shareholders via a buyback or special dividend, Levy said.
To contact the reporter on this story: Amy Thomson in Barcelona via firstname.lastname@example.org