1. A SIMPLE STOCK IDEA
Don Fitzgerald, CFA
Fund Manager, Tocqueville Value Europe
dfitzgerald@tocquevillefinance.fr
9th Value Investing Seminar
Trani, Italy - July 2012
2. MY STOCK IDEA:
High Returns (Capital / Margins)
Sustainable Returns
Growing Business - EPS growth 15% p.a. since 1994
Solid Management
Soft Cyclical
Highly Liquid Large Cap
………….trades at 7x EBIT
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12. DIGITAL OPPORTUNITY
Fastest growing media segment (market growth + 10%)
Share of Client Spend accruing to Agency rises
Margins Similar to Group Levels
Publicis Early Mover
12
13. DIGITAL NOT THREAT
Dis-intermediation Limited Risk
• Fragmentation and Complexity of Multimedia World
• Advertisers want Choice
• IQ + TQ + EQ1 = Success
1 I = Intelligence, Insight; T = Technology; E = Emotion 13
14. HIGH RETURNS - CAPITAL
Pre-Tax ROCE (%)
17
16
15
14
13
12
11
10
9
8
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cash conversion > 100% - capex light / negative operating
working capital
Source: Tocqueville Research
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15. HIGH RETURNS - BEST IN CLASS MARGINS
EBIT MARGIN (%)
17
15
13
11
9 PUBLICIS
7
Average
5 Competitor
3
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
* WPP plc, Omnicom Group, Interpublic Group, Havas SA and Aegis Group plc
Source: Bloomberg data 15
16. HIGH RETURNS SUSTAINABLE
Need Scale, Global Reach, Client-dedicated Resources
Oligopoly – 4 Global Agency Groups – No New Global
Network for last 20 years
No Long-term contracts but 90% retention rate
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17. HIGH RETURNS - COMPETITIVE EDGE
Well Positioned in Digital
Balance of Creativity and Analytics
Strong at Integrating and Retaining Talent
Balanced Global Exposure
17
19. GROWS PROFITS – SOME TOP-LINE GROWTH
ORGANIC SALES GROWTH (%)
10
8
6
4
2
0
-2
-4
-6
-8
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Consistently outperforms competitors on organic growth
Top-line growth driven by digital (30% of revenue) and emerging
markets (20% of revenue)
Source: Tocqueville Research
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20. GROWS PROFITS – MARGIN PROGRESS
EBITA MARGIN Medium
18% term
17% target 18%
16%
15%
Upward Trend
14%
13%
12%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Structurally Margin Improvement driven by
• Scaling of Digital
• Streamlining / Off-Shoring
Source: Tocqueville Research
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21. SOLID MANAGEMENT
Genuine Culture Commitment to Digital & Globalization
CEO Levy – IT Background
Key Person Risk
Leveraging Global Clients with Acquisitions
Post Investment Cycle more Shareholder Returns (net debt /
ebitda – 0.5x)
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22. SOFT CYCLICAL
Topline
• 60% of Sales from Defensive Sectors
Costs
• Staff Turnover 20%
• Discretionary Costs (incentives, freelancers) 7% Revenues
Margins Stable through the Cycle 15% - 17% EBIT
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24. CONCLUSION – MY STOCK IDEA…
High & Sustainable Returns
Well Positioned to Grow
Well Managed
Mild Cyclical Exposure
Modest Valuation
…IS A GOOD IDEA
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26. 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
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.
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