First-half 2017
An apparently uneventful six months
***Revenue: €833.8 millionOrganic growth:
+0.1%New Services: +18% Adjusted net profit:
+9.0%
Paris, 26 July 2017 - Ipsos' revenue for
first-half 2017 was €833.8 million, almost equivalent to that
published for first-half 2016 (€833.6 million). Slightly positive
currency effects (+0.5%) and negative scope effects (-0.6%) broadly
cancelled one another out. Ipsos recorded organic growth of +0.1%
for the period in question. All of these data illustrate the
perception of stable activity, with no clear trend.
This being so, significant changes are under way
and can be analysed from four different angles.
- The "New Services" component, comprising new business rolled
out by Ipsos in 2014 that reflects the innovative approaches used
to measure better and faster and thereby to help its clients gain a
better understanding of markets, continue to progress at a fast
pace. With organic growth of 18%, they account for more than 12% of
revenue, compared to 7% in 2014. In comparison, the more
traditional approaches are seeing the results of efforts to
increase productivity, linked, among others, to the continued
transition to greater digitisation of data collection systems and
also further simplification of research protocols.
- Certain emerging markets, notably in Asia-Pacific and Eastern
Europe, are driving growth, in contrast to more difficult areas
such as the Middle East or Brazil. Likewise, within the developed
markets, certain countries, such as the United Kingdom, maintained
a high growth rate while other countries, such as France, were
affected by specific events. The business in Paris hasn't being
good in the first-half of the year: very long electoral processes
and related uncertainties made market research on products, brands
or commercial communications more difficult in the same period.
Overall, the gap in growth between developed countries and emerging
countries became significant again (5%). Turnover declined by 1.3%
in developed countries and grew by 3.3% in emerging countries.
- Certain markets have been particularly affected by the lag
between sales volumes recorded at a given moment and the rate of
progress in carrying out the programmes that allow these sales to
be recorded in revenue recognised. The transformation in the mix of
services sold by Ipsos, already observed at the end of the first
quarter, and reflected in the increased weight of bigger programmes
with longer execution times rather than shorter and more ad-hoc
interventions, has its advantages, in particular in facilitating
the optimisation of the teams' work. A negative consequence is that
it delays the alignment of revenue with the level of sales. At the
end of June, Ipsos' order book overall remained positive, not very
far from the annual objective of 3%, at constant scope and exchange
rates. The difference with the published revenue growth (+0.1%) is
significant and similar to the one recorded at the end of the first
quarter. We anticipate a significant increase in Ipsos' revenue for
the second half of the year, especially where the difference is
significant, for example, in North America and in activities linked
to media measurement and advertising communication.
- Our clients' circumstances are also changing. Companies
involved in the CPG sector were, until recently, the biggest, most
global and, in certain respects, the most innovative users of
market research companies' services. Their ability to grow and at
the same time improve their financial performance is now being
called into question. They have been affected by strong competition
from local or more specific players and have of course had to
mobilise resources for their own digitisation processes. Under such
conditions, their real concern is to improve while reducing costs.
On the one hand, CPG companies, particularly the largest ones, are
excellent candidates for systematic use of the new research
approaches developed by Ipsos and others. At the same time, the
resources that they are allocating to marketing expenditures have
decreased, sometimes significantly. In total, in the first half of
2017, Ipsos' activity with these clients decreased by 5%, while it
increased significantly for clients from other sectors such as
pharmaceutical companies or financial institutions.
Performance by region and business
line
Consolidated revenues by geographical area (in
millions of euros) |
1st half2017 |
1st half2016 |
Change 2017/2016 |
Organic growth |
Europe, Middle East and Africa |
360.4 |
360.0 |
0.1% |
3% |
Americas |
318.5 |
330.4 |
-3.6% |
-5% |
Asia-Pacific |
154.9 |
143.1 |
8.2% |
6% |
First-half Revenues |
833.8 |
833.6 |
0.0% |
0.1% |
Consolidated revenues by business line (in millions of
euros) |
1st half2017 |
1st half2016 |
Change 2017/2016 |
Organic growth |
Media and Advertising Research |
177.7 |
182.7 |
-2.8% |
-3% |
Marketing Research |
444.0 |
447.8 |
-0.9% |
-0.5% |
Opinion & Social Research |
92.5 |
85.8 |
7.8% |
9% |
Client and employee relationship management |
119.7 |
117.2 |
2.1% |
1% |
First-half Revenues |
833.8 |
833.6 |
0.0% |
0.1% |
Financial performance
Summarized income statement
In millions of euros |
1st half2017 |
1st half2016 |
Change1st half 2017 / 1st half 2016 |
Revenue |
833.8 |
833.6 |
0.0% |
Gross profit |
544.2 |
545.0 |
-0.1% |
Gross margin |
65.3% |
65.4% |
- |
Operating profit |
50.7 |
53.8 |
-5.7% |
Operating margin |
6.1% |
6.5% |
- |
Total of exceptional, non-recurring items |
(7.9) |
8.7 |
- |
Finance charge |
(9.7) |
(10.2) |
-5.2% |
Tax |
(7.9) |
(12.4) |
-36.3% |
Adjusted net profit* (attributable to the Group) |
36.0 |
33.0 |
9.0% |
*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 (calculated by deducting
from revenue the variable and external direct costs related to
contract execution) amounted to 65.3% compared with 65.4% in the
first-half of 2016 (and 65.1% for full year 2016). Its change is
related to the weight of major contracts, which is higher in this
half and for which gross profit is often lower (which does not say
anything about the operating margin on these contracts). The
continuation of digitisation of data collection and growth in New
Services generates higher gross profit otherwise.
Concerning operating costs, payroll
expenses are up 0.6%, with Group headcount rising 1.5%, mainly in
emerging countries, to give a permanent headcount of 16,845 at 30
June 2017.
The cost of variable share-based payments
was stable at €5.1 million.
Overhead costs are under control
and fell 1.9%, notably due to savings in rental costs.
Overall operating costs, recorded
additional expenses related to the New Way programme, for which
Ipsos forecast €5 million in additional investment in 2017: €2.3
million was spent in the first-half of 2017.
Other operating income and expenses
consist mainly of the impact of exchange rate transactions on
operating account items, which were a negative €2 million over the
half-year period, whereas they were a positive €1.3 million in the
first half of 2016.
Group operating margin amounted to €50.7
million, or 6.1% of revenue, a drop of 40 basis points compared to
the same period in the previous year, due to stable revenue volume
and the investment in the New Way programme. To be noted: due to
the seasonality of the market research activity, the operating
margin of the first-half is not an indicator of the one of the full
year.
Below the operating margin, the amortisation
of intangibles identified on acquisitions concerns 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 allocation
amounted to €2.4 million compared with €2.5 million the previous
year.
The balance of other non-operating,
non-recurring income and expense was -€7.9 million, compared
with net income of €8.7 million in the previous year. It comprises
unusual items not related to operations, and includes acquisition
costs as well as the costs of the current restructuring plans.It
included in particular, in the first half of 2016, a net gain of
€15.4 million in relation to the repayment received 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 €6.7 million in restructuring and
streamlining expenses was recognised, some of which are related to
the New Way programme.
Finance costs. The net cost of interest
amounted to €9.7 million, compared with €10.2 million, down 5.2%,
due to a fall in its credit conditions.
Taxes. The effective tax rate on the IFRS
income statement was 26.8%, compared with 25.6% for the previous
year. As in the past, it includes a deferred tax liability of €1.3
million (compared with a deferred tax liability of €2.1 million in
the first half of 2016), 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.
The Net profit (attributable to the
Group), stands at €21.6 million versus €35.2 million in first
half 2016, the change being mainly related to the exceptional
profit of €15.4 million recorded under "other non-operating and
non-recurring income and expenses".
Adjusted net profit attributable to the
Group, which is the relevant and constant indicator used to
measure performance, came to €36.0 million, up 9.0% compared with
the first half of 2016.
Financial structure
Free cash flow. Operating cash flow
stands at €56.6 million in line with changes in income from
operating activities. - The working capital requirement
improved by €7.4 million. - Current investments in property, plant
and equipment and intangible assets, consisting mainly of IT
investments, were stable at €7.7 million.
Concerning non-current investments, Ipsos
invested €5.4 million over the half year in acquisitions,
proceeding in particular with the buyback of non-controlling
interests in a US company and in certain emerging countries
(notably Central America).
In addition, Ipsos received €3.8 million from
funds raised from its IPF 2020 stock option plan. The potential
dilution of the 156,344 shares subscribed was offset by the
cancellation of the same number of its own shares from among those
bought back in November 2016.
As a reminder, Ipsos invested in its share
buyback programme in 2016, including €65 million in November 2016
for the purchase of Ipsos shares from LT Participations, its
holding company, prior to the merger between Ipsos and LT
Participations on 29 December 2016. At 30 June 2017, Ipsos holds
1,580,596 of own shares (3.6% of its share capital) allocated to
the involvement plans of its employees.
Shareholders' equity totalled €892
million as at 30 June 2017, compared with €939 million published as
at 31 December 2016, after deduction of the €36.4 million in
dividends paid on 5 July 2017.
Net financial debt totalled €494 million
at 30 June 2017, compared with €544 million at 31 December 2016,
thanks to the strong operating cash flows mentioned above.The net
gearing was 55.4%, compared with 58.0% at 31 December 2016.
Liquidity position. Net
cash at the end of the half-year period was €123 million,
compared with €127 million at 31 December 2016, giving Ipsos a good
liquidity position. Ipsos also has over €300 million available
through credit facilities.
OUTLOOK FOR 2017
Ipsos operates in a growing market: the demand
for information and analysis from companies and public institutions
for better measurement and understanding of Society, markets and
ultimately people, remains strong. It is also undergoing
transformation as today, the combined use of new progress in human
sciences, data sciences, technologies and know-how make it possible
to better exploit information. It is by using the power of these
sciences and technologies, but also the skills of its teams, that
Ipsos is entering a new phase full of confidence: one where it can
legitimately support its clients to achieve fair, clear, accessible
and full understanding of their own markets.
Thanks to the New Way programme, which will be
completed, as planned, at the end of this year, Ipsos has
demonstrated that, with the aid of innovation and, in this case,
the implementation of New Services, a large, established company
can hold its position and retain the confidence of its clients.
The "Total Understanding" programme, whose
principle and existence were made public a few months ago, will now
take over. It will build on the lessons learnt from New Way. It is
also more ambitious. Its aim is for Ipsos to eventually be able to
offer its clients all the resources required to better understand
the behaviour, reactions and aspirations of their environment, the
market where they operate and the people they target. This approach
will enable a company to build winning competitive positions and
also ensure that the resources that they have decided to allocate,
are effective.
It is by having the ability to deploy a
sufficient diversity of investigation, analysis and reporting
solutions that Ipsos will confirm its position not only as a
supplier of reliable and relevant information, but also as a
partner in the management of information which is essential to the
success of the most innovative ideas and to the implementation of
the most ambitious plans.
The precise details of the "Total Understanding"
plan will be communicated when Ipsos presents its annual results in
February 2018. In the meantime, Ipsos' teams will continue to work
on completing financial year 2017 successfully.
To achieve the 3% target for organic growth in
2017 as published at the start of the year, the international CPG
companies, which are among Ipsos' longest-standing and largest
clients, need to regain their average historical levels of activity
in the second-half 2017.
Another scenario would be that the activity of
these same companies (along with Ipsos) declines further and Ipsos'
growth would fall to between 1% and 2%.
The first scenario (the most optimistic) is not
very likely, since it assumes that these companies have already
subscribed to the new approach, to these new more fragmented and
volatile markets, and that Ipsos has also had the time to adapt its
services to their new requirements.
The second scenario (the most pessimistic) is
also unlikely, in that it assumes an additional decline in sales in
the second half of the year plus the persistence of certain lags
between the sales level and the level of revenue actually
recognised. Furthermore, the 2016/2017 comparison base will be more
favourable in the second half of the year, particularly towards the
end of the year.
This being so, regardless of the scenario,
whether growth is below 2% or above 2%, operating margin will
be slightly up in comparison with 2016, as announced.
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/en/investors The 2016 performance and
results presentationwill be available from 27 July on
the www.ipsos.com/en/investors
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 2017
In thousand euros |
30 June 2017 |
30 June 2016 |
31 December 2016 |
Revenue |
833,794 |
833,599 |
1,782,691 |
Direct
costs |
(289,583) |
(288,589) |
(622,244) |
Gross
profit |
544,211 |
545 010 |
1,160,446 |
Payroll - excluding
share-based payments |
(374,309) |
(372,135) |
(751,754) |
Payroll - share-based
payments* |
(5,104) |
(5,039) |
(9,991) |
General operating
expenses |
(111,727) |
(113,873) |
(220,646) |
Other
operating income and expenses |
(2,355) |
(180) |
2,026 |
Operating margin |
50,716 |
53,784 |
180,080 |
Amortisation of
intangibles identified on acquisitions* |
(2,405) |
(2,451) |
(4,786) |
Other non-operating
income and expense |
(7,973) |
8,742 |
143 |
Income
from associates |
69 |
(48) |
(46) |
Operating profit |
40,407 |
60,026 |
175,391 |
Finance costs |
(9,682) |
(10,217) |
(20,811) |
Other
financial income and expense* |
(1,134) |
(1,188) |
(475) |
Profit
before tax |
29,591 |
48,621 |
154,105 |
Income tax - excluding
deferred tax on goodwill |
(6,622) |
(10,286) |
(37,765) |
Income
tax - deferred tax on goodwill * |
(1,308) |
(2,162) |
(6,582) |
Income
tax |
(7,930) |
(12,447) |
(44,347) |
Net
profit |
21,660 |
36,174 |
109,758 |
Attributable to the
Group |
21,558 |
35,179 |
106,897 |
Attributable to Minority interests |
103 |
995 |
2,861 |
Earnings per share (in
euros) - Basic |
0.50 |
0.78 |
2.40 |
Earnings
per share (in euros) - Diluted |
0.50 |
0.77 |
2.36 |
|
|
|
|
|
|
|
|
Adjusted net profit* |
|
36,380 |
34,260 |
124,945 |
|
|
Attributable to the
Group |
|
36,031 |
33,047 |
121,657 |
|
|
Attributable to
Minority interests |
|
349 |
1,213 |
3,288 |
|
|
Adjusted earnings per
share (in euros) - Basic |
|
0.84 |
0.73 |
2.73 |
|
|
Adjusted
earnings per share (in euros) - Diluted |
|
0.83 |
0.72 |
2.69 |
|
*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.
Consolidated balance sheet
First half to 30 June 2017
In thousands of euros |
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
ASSETS |
|
|
|
|
Goodwill |
1,198,102 |
1,241,637 |
1,259,193 |
|
Other intangible
assets |
64,624 |
74,455 |
71,489 |
|
Property, plant and
equipment |
32,834 |
34,225 |
35,517 |
|
Investments in
associates |
557 |
206 |
207 |
|
Other non-current
financial assets |
20,001 |
16,938 |
22,547 |
|
Deferred
tax assets |
18,724 |
13,884 |
18,184 |
|
Total
non-current assets |
1,334,842 |
1,381,345 |
1,407,138 |
|
Trade receivables |
524,548 |
552,754 |
624,406 |
|
Current income tax |
26,670 |
21,442 |
15,204 |
|
Other current
assets |
87,408 |
88,286 |
78,677 |
|
Derivative financial
instruments |
2,898 |
6,804 |
3,399 |
|
Cash and
cash equivalents |
123,082 |
126,686 |
164,892 |
|
Total
current assets |
764,606 |
795,972 |
886,579 |
|
TOTAL
ASSETS |
2,099,448 |
2,177,318 |
2,293,717 |
|
|
|
|
|
|
In thousands of euros |
30 June 2017 |
30 June 2016 |
31 December 2016 |
|
LIABILITIES |
|
|
|
|
Share capital |
11,109 |
11,334 |
11,109 |
|
Share premium |
516,275 |
540,201 |
516,489 |
|
Own shares |
(41,547) |
(808) |
(55,905) |
|
Other reserves |
472,063 |
417,092 |
492,737 |
|
Currency
translation differences |
(82,611) |
(56,785) |
(44,819) |
|
Shareholders' equity - attributable to the Group |
875,289 |
911,034 |
919,612 |
|
Minority
interests |
17,412 |
20,569 |
19,805 |
|
Total
shareholders' equity |
892,701 |
931,603 |
939,417 |
|
Borrowings and other
long-term financial liabilities |
540,539 |
582,792 |
626,152 |
|
Non-current
provisions |
9,150 |
7,465 |
9,230 |
|
Retirement benefit
obligations |
28,154 |
25,592 |
28,029 |
|
Deferred tax
liabilities |
97,122 |
97,897 |
100,432 |
|
Other
non-current liabilities |
21,663 |
40,291 |
21,159 |
|
Total
non-current liabilities |
696,629 |
754,037 |
785,002 |
|
Trade payables |
226,417 |
230,578 |
262,865 |
|
Short-term portion of
borrowings and other financial liabilities |
79,717 |
53,230 |
86,662 |
|
Current income tax
liabilities |
4,586 |
6,059 |
11,104 |
|
Current provisions |
8,685 |
10,147 |
9,664 |
|
Other
current liabilities |
190,713 |
191,663 |
199,005 |
|
Total
current liabilities |
510,118 |
491,677 |
569,300 |
|
TOTAL
LIABILITIES |
2,099,448 |
2,177,318 |
2,293,717 |
|
Consolidated cash flow statement
First half to 30 June 2017
In thousands of euros |
30 June 2017 |
30 June 2016 |
31 December 2016 |
OPERATING
ACTIVITIES |
|
|
|
NET PROFIT |
21,660 |
36,174 |
109,758 |
Adjustments to
reconcile net profit to cash flow |
|
|
|
Amortisation and
depreciation of fixed assets |
12,796 |
12,754 |
25,970 |
Net profit of equity
associated companies - net of dividends received |
(69) |
48 |
46 |
Losses/(gains) on asset
disposals |
(118) |
203 |
2,481 |
Movement in
provisions |
25 |
(15,537) |
(12,702) |
Share-based payment
expense |
4,747 |
4,893 |
9,737 |
Other non cash
income/(expenses) |
(109) |
14 |
978 |
Acquisitions costs of
consolidated companies |
132 |
1,184 |
1,325 |
Finance costs |
9,682 |
10,217 |
20,811 |
Income tax expense |
7,930 |
12,447 |
44,347 |
OPERATING CASH FLOW BEFORE WORKING CAPITAL. FINANCING AND TAX
PAID |
56,676 |
62,398 |
202,752 |
Change in working
capital requirement |
7,383 |
26,191 |
22,819 |
Interest paid |
(9,715) |
(9,623) |
(20,351) |
Income tax paid |
(24,707) |
(15,838) |
(38,046) |
CASH FLOW FROM OPERATING ACTIVITIES |
29,637 |
63,128 |
167,174 |
INVESTMENT
ACTIVITIES |
|
|
|
Acquisitions of
property. plant. equipment and intangible assets |
(7,850) |
(8,136) |
(17,631) |
Proceeds from disposals
of property. plant. equipment and intangible assets |
200 |
879 |
133 |
Acquisition of
financial assets |
1,024 |
(374) |
(1,070) |
Acquisition of
consolidated companies and business goodwill |
0 |
22,425 |
23,900 |
CASH FLOW FROM INVESTMENT ACTIVITIES |
(6,627) |
14,794 |
5,332 |
FINANCING
ACTIVITIES |
|
|
|
Increase/(decrease) in
capital |
0 |
0 |
(225) |
(Purchase)/proceeds of
own shares |
3,790 |
(6,163) |
(85,050) |
Increase/(decrease) in
long-term borrowings |
(57,170) |
(63,561) |
(1,688) |
Increase/(decrease) in
bank overdrafts and short-term debt |
(338) |
1,672 |
491 |
Acquisition of minority
interests |
(5,441) |
(32,283) |
(33,312) |
Dividends paid to
parent-company shareholders |
0 |
0 |
(36,358) |
Dividends paid to
minority shareholders of consolidated companies |
0 |
(465) |
(431) |
CASH FLOW FROM FINANCING ACTIVITIES |
(59,159) |
(100,801) |
(156,575) |
NET
CASH FLOW |
(36,149) |
(22,879) |
15,932 |
Impact of foreign
exchange rate movements |
(5,662) |
(2,010) |
(2,615) |
CASH AT BEGINNING OF PERIOD |
164,892 |
151,576 |
151,576 |
CASH
AT END OF PERIOD |
123,082 |
126,686 |
164,892 |
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/bafe8ad0-194e-4b3f-8017-ef58873dbd6b
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