Ipsos on the move *** Revenue:
€833.6 million Organic growth +3.3% New Services
+24% Increased generation of cash flows and net
profit
In the first half of 2016, Ipsos' revenue amounted to €833.6
million, almost stable compared with the first half of 2015.
Exchange rate effects were negative, at 4.5% over the half-year,
slightly more than offset by scope effects at 1.3% (attributed to
the integration of RDA in Detroit on 1 July 2015) and in particular
by organic growth of 3.3%.
Results for the second quarter alone (3% of
organic growth) confirm the observation made at the end of the
preceding quarter: in 2016, Ipsos is seeing organic growth in its
revenue that is significant, both in terms of its size and
duration, satisfactory in terms of content ("New Services"
represent 2/3 of total growth) and healthy, since it has been
accompanied also by an improvement in more strictly financial
indicators such as generation of free cash flows.
Performance by region and business
line
Consolidated revenues by geographical area (in
millions of euros) |
1st half 2016 |
1st half 2015 |
Change 2016/2015 |
Organic growth |
Europe, Middle East and Africa |
360.0 |
369.7 |
-2.6% |
1.5% |
Americas |
330.4 |
326.2 |
1.3% |
3% |
Asia-Pacific |
143.1 |
137.0 |
4.5% |
8% |
First-half Revenues |
833.6 |
832.9 |
0.1% |
3.3% |
In 2016, all geographic regions are experiencing
growth. Performance in the regions has been satisfactory (EMEA),
good (Americas), and even excellent (Asia-Pacific). This is also
the case by market type: the most developed markets have grown by
2.8% at constant scope and exchange rates, buoyed by the United
States, Japan and Australia, among others. This also applies to
emerging markets, which, in 2015, due to the effects of downturns
in certain crisis-hit markets, particularly Russia, Brazil and the
Middle East, impacted Ipsos' results. However, in the first half of
2016, the emerging markets have grown by 4.4% on average, seeing
better growth than in the developed markets, as expected, and much
better than the previous year, as was hoped.
Consolidated revenues by business line (in millions of
euros) |
1st half 2016 |
1st half 2015 |
Change 2016/2015 |
Organic growth |
Media and Advertising Research |
182.7 |
193.3 |
-5.5% |
-1% |
Marketing Research |
447.8 |
446.5 |
0.3% |
4% |
Opinion & Social Research |
85.8 |
86.6 |
-0.8% |
4% |
Client and employee relationship management |
117.2 |
106.5 |
10.0% |
7% |
First-half Revenues |
833.6 |
832.9 |
0.1% |
3.3% |
Similarly, all business lines have improved
their performance compared with the previous period. Those that
grew in 2015, have seen their growth improve further in 2016. This
is the case for marketing research, from +0.5% to +4%, opinion
research, from +2% to +4%, and services dedicated to Customer
Relationship Management (from +0.5% to +7%: a record half-year
improvement for a business line since 2011!). Ipsos Connect, which
manages since 2015 in a single organisation advertising content and
digital and traditional media channels related research, had a
difficult start its first year of existence, with a 6.5% fall in
business at constant scope and exchange rates. 2016 will be a year
of stabilisation. In the first half of 2016, its business is almost
stable with organic growth of -1%, the low point of the expected
change.
Financial performance
Summarized income statement
In millions of euros |
1st half 2016 |
1st half 2015 |
Change 1st half 2016 / 1st half 2015 |
Revenue |
833.6 |
832.9 |
0.1% |
Gross profit |
545.0 |
536.4 |
1.6% |
Gross margin |
65.4% |
64.4% |
- |
Operating profit |
53.8 |
46.8 |
14.9% |
Operating margin |
6.5% |
5.6% |
- |
Total of exceptional, non-recurring items |
8.7 |
(11.2) |
- |
Finance charge |
(10.2) |
(12.1) |
- |
Tax |
(12.4) |
(4.5) |
- |
Adjusted net profit* (attributable to the Group) |
33.0 |
30.5 |
8.2% |
*Adjusted net profit is calculated
before non-cash items linked to IFRS 2 (share-based payments),
amortisation of acquisition-related intangible assets (client
relationships), deferred tax liabilities related to goodwill on
which amortisation is tax-deductible in certain countries and the
impact net of tax of other non-recurring income and expenses. |
Gross profit, which is calculated by
deducting external direct variable costs attributable to contracts
from revenues, grew by 1.6%. This continued growth (65.4%, versus
64.4% in the first half of 2015) is due to both the digitalisation
of data collection and growth in New Services, where gross margins
are often higher. It is also the sign of the ability to maintain
prices in all countries.
As regards operating costs, payroll
expenses are up 1.0% and decreased slightly as a percentage of
revenue and gross profit.
The cost of variable share-based
compensation went from €5.9 million to €5.0 million. As
expected, since the programme reached its peak in 2014, it no
longer has an effect on the change in operating margin.
Overhead costs are under control and fell
2.4%.
In the second half of the year, some additional
expenses are expected to appear in operating costs in
relation to the "New Way" programme, for which Ipsos earmarked €10
million in additional current investments in 2016, of which €4.4
million was spent in the first half of 2016 (45% for payroll
expenses and 55% for overheads).
Other operating income and expenses
consist mainly of the impact of exchange rate transactions on
operating account items, which were a negative €0.2 million over
the half-year period, whereas they were a positive €1.3 million in
the first half of 2015.
In total, the Group's operating margin
was €53.8 million euros, or 6.5% of revenue, for an increase of 80
basis points over the same period last year, thanks to the
re-establishment of strong organic growth for revenue and good
gross profit.
Below the operating margin, the
amortisation of intangibles identified on acquisitions concern the
portion of goodwill allocated to client relationships during the
12-month period following an acquisition, recognised in the income
statement over several years, in accordance with IFRS. This charge
came to €2.5 million, compared with €2.6 million the previous
year.
The balance of other non-operating,
non-recurring income and expense was +€8.7 million, compared
with a net expense of €11.2 million in the previous year. It
comprises unusual items not related to operations, and includes
acquisition costs, as well as the costs of the restructuring plans.
It includes in particular, in the first half of 2016, a net gain of
€15.4 million in relation to the repayment from Aegis in February
2016 bringing an end to all claims and legal proceedings regarding
the dispute arising from the acquisition of Synovate in 2011. In
addition, a total of €6 million in restructuring and streamlining
expenses were recognised, some of which are related to the "New
Way" programme.
Finance costs. The net cost of interest
amounted to €10.2 million, compared with €12.1 million, down 15.4%,
due to the drop in Group net debt and to a fall in its credit
conditions.
Taxes. The effective tax rate on the IFRS
income statement was 25.6%, compared with 25.2% for the previous
year. As in the past, it includes a deferred tax liability of €2.2
million (compared with a deferred tax liability of €2.4 million in
the first half of 2015), cancelling out the tax saving achieved
through the tax deductibility of goodwill amortisation in certain
countries, even though this deferred tax charge would fall due only
if the activities concerned were sold, and which is restated
accordingly in adjusted net profit.
Net profit attributable to the Group,
totalled €35.2 million, an increase of 173.5% from the first half
of 2015.
Adjusted net profit attributable to the
Group, which is the relevant indicator used to measure
performance, came to €33.0 million, up 8.2% compared with the first
half of 2015.
Financial structure
Net free cash flow. Cash flow generated
by operations, net of current investments, rose 3.3% to €55.5
million, against €53.7 million in the first half of 2015. This was
due to careful management of the change in working capital
requirement, at a new record level since the Ipsos IPO some 17
years ago on 1 July 1999. In detail: - Operating cash flow stood at
€62.4 million, against €55.4 million, up 12.6% in line with the
rise in operating profit; - The working capital requirement
improved by €26.2 million; - Current investments in property, plant
and equipment and intangible assets, primarily consisting of IT
investments, are €7.7 million, versus €12.2 million in the first
half of 2015.
Concerning non-current net investments,
Ipsos invested €36 million over the half year in acquisitions,
primarily through the buyback of non-controlling interests in a US
company and in certain emerging countries (including Russia and
Indonesia). Ipsos also invested €6.2 million in a share
buyback programme in order to limit the dilution effects of its
bonus share allocation plans. Finally, the repayment from Aegis of
£20 million (€26.2 million) in February 2016 was classified as a
decrease in non-current investments in the cash flow table.
Shareholders' equity totalled €932
million as at 30 June 2016, compared with €945 million published as
at 31 December 2015, after deduction of the €34 million in
dividends paid on 5 July 2016.
Net financial debt totalled €503 million
at 30 June 2016, compared with €552 million at 31 December 2015,
thanks to the strong operating cash flows mentioned above.
The net gearing was 53.9%, compared with 59.8% at 31 December
2015.
Liquidity position. Net cash at
the end of the half-year period was €126.7 million, compared with
€151.6 million at 31 December 2015, giving Ipsos a good liquidity
position. The Company also has over €300 million available through
credit facilities.
OUTLOOK FOR 2016
China seems to be able to manage its progress on
the difficult path from one economic model to another. It will be
in India where FoxCOM will build its next eight factories and
provide another million low-skilled jobs. China will be developing
a 150-200-seat plane that will be a real competitor to single-aisle
Boeing and Airbus aircraft.
Brazil is still facing a difficult situation but
the Olympic Games will be happening as planned next month in Rio,
with the Russian flag present among many others. It is hoped that
they will be a success, and will prove that a great country, like a
great team, is always very resilient.
The "United" Kingdom will leave the European
Union, but will be more European than ever. Late night negotiations
in Brussels will once again be on the agenda.
These constitute three of the main markets where
Ipsos deploys significant resources, generates a large volume of
business and grows with its clients thanks to New Services that are
more immersive, more analytical, more connected, new relationships
that are closer, more useful and easier to promote. These three
markets are symbols of a paradoxical time that presents immense
challenges and extraordinary opportunities. There is no way to
assert that all will go well, everywhere, all the time. There is
however no reason for us to describe a world only in black terms,
even if it has rarely been so anxiety-provoking, uncertain,
dispersed even divided by emotions often understandable but
sometimes dangerous. This is the paradox of a civilisation where
information which is not always right and relevant is nevertheless,
immediate, shared and omnipresent.
In summary, invention, diffusion, activation and
fragmentation are the key themes of the times and they justify the
maintain of marketing spending at a high level. Those who manage
these budgets know that they will be efficient only if they
understand the market well, know consumers and clients well,
understand socially responsible approaches and their increasing
influence on consumer behaviour, to better assess and anticipate
how existing or new competition is behaving, as well as the likely
consequences.
The research industry, in all its dimensions, is
supported by the need to measure well, to better understand, and
even to better anticipate what our reasoning, our experience, our
emotions or our networks are going to make us do (or not). This
industry, of which Ipsos is a proud member, has many assets. It is
essential to its clients - businesses both large and small,
institutions and organisations of all types - that operate and are
willing to build their successes in those markets that are open,
connected, volatile and competitive.
Thanks to its knowledge, its skills, its
resources, including and above all thanks to its teams in 87
countries and 250 cities, Ipsos brings to its clients: its
multiculturalism, its experience of working closely with its
clients, its capacity to develop new services and make them
accessible, created from a strong command of today's technology and
sciences. Moreover, Ipsos holds firm to its status - and its
reality - as a business that is independent and neutral. At a time
when everything becomes more fluid, competitive, and demanding,
being a global business that is specialised and independent is it's
a source of pride and its competitive edge.
Ipsos' outlook must be seen in the context of a
complex "macro" environment in which companies operate won't
deteriorate more. If this is the case, 2016 will be a good year,
the best since 2011 for Ipsos. It will be marked by several
achievements in terms of market gains, an upswing from New
Services, strengthening the teams and a good cash flow generation.
Lastly, the operating margin will be stable, at the same level as
in 2015, after an additional €10 million in operating costs for the
"New Way" programme and a more aggressive variable compensation
scheme.
Appendix
- Consolidated income statement
- Statement of financial position
- Consolidated cash flow statement
A full set of consolidated financial
statements is available at www.ipsos.com The 2016
performance and results presentation will be available from
27 July on the www.ipsos.com
About Ipsos
Ipsos is an independent market research company
controlled and managed by research professionals, with offices in
87 countries. Founded in France in 1975, Ipsos ranks third in the
global research industry. Ipsos has been listed on the Paris Stock
Exchange since 1999.
GAME CHANGERS « Game Changers » is the
Ipsos signature. At Ipsos we are passionately curious about people,
markets, brands and society. We make our changing world easier and
faster to navigate and inspire clients to make smarter decisions.
We deliver with security, simplicity, speed and substance. We are
Game Changers.
Ipsos is listed on Eurolist - NYSE-Euronext. The
company is part of the SBF 120 and the Mid-60 index and is eligible
for the Deferred Settlement Service (SRD).
ISIN code FR0000073298, Reuters ISOS.PA,
Bloomberg IPS:FP www.ipsos.com
Consolidated income statement
First-half to 30 June 2016
In thousand euros |
30 June 2016 |
30 June 2015 |
31 December 2015 |
Revenue |
833,599 |
832,925 |
1,785,275 |
Direct costs |
(288,589) |
(296,570) |
(635,538) |
Gross profit |
545,010 |
536,355 |
1,149,736 |
Payroll - excluding share-based payments |
(372,135) |
(368,313) |
(733,656) |
Payroll - share-based payments* |
(5,039) |
(5,888) |
(10,812) |
General operating expenses |
(113,873) |
(116,626) |
(227,999) |
Other operating income
and expenses |
(
180) |
1,281 |
946 |
Operating
margin |
53,784 |
46,809 |
178,215 |
Amortisation of intangibles identified on
acquisitions* |
(2,451) |
(2,572) |
(5,097) |
Other non-operating income and expense* (1) |
8,742 |
(11,203) |
(17,302) |
Income from
associates |
(48) |
(89) |
(95) |
Operating
profit |
60,026 |
32,945 |
155,721 |
Finance costs |
(10,217) |
(12,078) |
(23,849) |
Other financial income
and expense* |
(1,188) |
(2,987) |
(2,131) |
Profit before
tax |
48,621 |
17,879 |
129,741 |
Income tax - excluding deferred tax on
goodwill |
(10,286) |
(2,061) |
(29,353) |
Income tax -
deferred tax on goodwill * |
(2,162) |
(2,444) |
(4,465) |
Income tax |
(12,447) |
(4,505) |
(33,818) |
Net profit |
36,174 |
13,374 |
95,924 |
Attributable to the Group |
35 179 |
12,864 |
92,993 |
Attributable to
Minority interests |
995 |
510 |
2,930 |
Earnings per share (in euros) - Basic |
0.78 |
0.28 |
2.05 |
Earnings per share (in
euros) - Diluted |
0.77 |
0.28 |
2.03 |
|
|
|
|
|
|
|
|
Adjusted net
profit* |
|
34,260 |
31,340 |
129,792 |
|
|
Attributable to the Group |
|
33,047 |
30,540 |
126,548 |
|
|
Attributable to Minority interests |
|
1,213 |
800 |
3,244 |
|
|
Adjusted earnings per share (in euros) -
Basic |
|
0.73 |
0.67 |
2.80 |
|
|
Adjusted earnings per
share (in euros) - Diluted |
|
0.72 |
0.66 |
2.76 |
|
*Adjusted net profit is calculated before
non-cash items linked to IFRS 2 (share-based payments),
amortisation of acquisition-related intangible assets (client
relationships), deferred tax liabilities related to goodwill on
which amortisation is tax-deductible in certain countries and the
impact net of tax of other non-recurring income and expenses and
the non-monetary impact of changes in puts in other financial
income and expense.
- The other non-current income and expense line includes as of
June 2016 the positive net impact of Aegis refund amounting to 15
390 thousands of euros and which is described in the note 4.3 to
the consolidated financial statements.
Consolidated balance sheet
First-half to 30 June 2016
In thousands of euros |
30 June 2016 |
30 June 2015 |
31 December 2015 |
|
ASSETS |
|
|
|
|
Goodwill |
1,241,637 |
1,268,089 |
1,264,920 |
|
Other intangible assets |
74,455 |
86,585 |
80,469 |
|
Property, plant and equipment |
34,225 |
34,068 |
37,209 |
|
Investments in associates |
206 |
268 |
262 |
|
Other non-current financial assets |
16,938 |
19,950 |
17,305 |
|
Deferred tax assets |
13,884 |
37,477 |
14,983 |
|
Total non-current
assets |
1,381,345 |
1,446,437 |
1,415,149 |
|
Trade receivables |
552,754 |
563,767 |
627,282 |
|
Current income tax |
21,442 |
21,661 |
12,237 |
|
Other current assets |
88,286 |
95,362 |
72,596 |
|
Derivative financial instruments |
6,804 |
4,442 |
4,589 |
|
Cash and cash
equivalents |
126,686 |
169,932 |
151,576 |
|
Total current
assets |
795,972 |
855,163 |
868,280 |
|
TOTAL ASSETS |
2,177,318 |
2,301,600 |
2,283,430 |
|
|
|
|
|
|
In thousands of euros |
30
June 2016 |
30
June 2015 |
31 December 2015 |
|
LIABILITIES |
|
|
|
|
Share capital |
11,334 |
11,334 |
11,334 |
|
Share premium |
540,201 |
540,201 |
540,201 |
|
Own shares |
( 808) |
(1,241) |
(1,220) |
|
Currency translation differences |
(
56,785) |
(322) |
(48,110) |
|
Other reserves |
417,092 |
344,829 |
423,190 |
|
Shareholders' equity -
attributable to the Group |
911,034 |
894,802 |
925,395 |
|
Minority interests |
20,569 |
19,593 |
19,889 |
|
Total shareholders'
equity |
931,603 |
914,395 |
945,284 |
|
Borrowings and other
long-term financial liabilities |
582,792 |
577,253 |
635,868 |
|
Non-current provisions |
7,465 |
5,545 |
5,157 |
|
Retirement benefit obligations |
25,592 |
25,238 |
25,030 |
|
Deferred tax liabilities |
97,897 |
120,593 |
100,015 |
|
Other non-current
liabilities |
40,291 |
48,767 |
37,024 |
|
Total non-current
liabilities |
754,037 |
777,397 |
803,094 |
|
Trade payables |
230,578 |
248,157 |
263,492 |
|
Short-term portion of borrowings and other
financial liabilities |
53,230 |
144,292 |
72,694 |
|
Current income tax liabilities |
6,059 |
3,226 |
6,781 |
|
Current provisions |
10,147 |
3,784 |
5,121 |
|
Other current
liabilities |
191,663 |
210,349 |
186,965 |
|
Total current
liabilities |
491,677 |
609,808 |
535,052 |
|
TOTAL
LIABILITIES |
2,177,318 |
2,301,600 |
2,283,430 |
|
Consolidated cash flow statement
First-half to 30 June 2016
In thousands of euros |
30 June 2016 |
30 June 2015 |
31 December 2015 |
OPERATING
ACTIVITIES |
|
|
|
NET PROFIT |
36,174 |
13,374 |
95,924 |
Adjustments to
reconcile net profit to cash flow |
|
|
|
Amortisation and depreciation of fixed
assets |
12,754 |
13,535 |
27,525 |
Net profit of equity associated companies - net
of dividends received |
48 |
89 |
95 |
Losses/(gains) on asset disposals |
203 |
18 |
161 |
Movement in provisions |
(15,537) |
629 |
(3,385) |
Share-based payment expense |
4,893 |
5,294 |
10,189 |
Other non cash income/(expenses) |
14 |
3,794 |
4,478 |
Acquisitions costs of consolidated companies |
1,184 |
2,112 |
5,412 |
Finance costs |
10,217 |
12,078 |
23,849 |
Income tax expense |
12 447 |
4,505 |
33,818 |
OPERATING CASH FLOW BEFORE WORKING CAPITAL. FINANCING AND TAX
PAID |
62,398 |
55,429 |
198,064 |
Change in working capital requirement |
26,191 |
36,952 |
18,432 |
Interest paid |
(9,623) |
(10,458) |
(22,004) |
Income tax paid |
(15,838) |
(15,947) |
(26,510) |
CASH FLOW FROM OPERATING ACTIVITIES |
63,128 |
65,976 |
167,982 |
INVESTMENT
ACTIVITIES |
|
|
|
Acquisitions of property. plant. equipment and
intangible assets |
(8,136) |
(11,705) |
(23,579) |
Proceeds from disposals of property. plant.
equipment and intangible assets |
879 |
389 |
454 |
Acquisition of financial assets |
( 374) |
(932) |
1,343 |
Acquisition of consolidated companies and
business goodwill |
22,425 |
(1,446) |
(37,778) |
CASH FLOW FROM INVESTMENT ACTIVITIES |
14,794 |
(13,695) |
(59,560) |
FINANCING
ACTIVITIES |
|
|
|
Increase/(decrease) in capital |
0 |
0 |
0 |
(Purchase)/proceeds of own shares |
(6,163) |
(9,492) |
(9,499) |
Increase/(decrease) in long-term borrowings |
(63,561) |
(22,158) |
(46,604) |
Increase/(decrease) in bank overdrafts and
short-term debt |
1,672 |
(1,065) |
(1,262) |
Acquisition of minority interests |
(32,283) |
(3,928) |
(12,546) |
Dividends paid to parent-company
shareholders |
0 |
0 |
(34,071) |
Dividends paid to minority shareholders of
consolidated companies |
(465) |
(1,869) |
(3,428) |
CASH FLOW FROM FINANCING ACTIVITIES |
(100,801) |
(38,511) |
(107,410) |
NET CASH FLOW |
(22,879) |
13,769 |
1,012 |
Impact of foreign exchange rate movements |
(2,010) |
6,905 |
1,306 |
CASH AT BEGINNING OF PERIOD |
151,576 |
149,258 |
149,258 |
CASH AT END OF
PERIOD |
126,686 |
169,932 |
151,576 |
Ipsos First-half 2016
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