First-half
2017
An apparently
uneventful six months
***
Revenue: €833.8 million
Organic 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 half
2017 |
1st half
2016 |
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 half
2017 |
1st half
2016 |
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 half
2017 |
1st half
2016 |
Change
1st 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.
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
presentation
will 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 |
Ipsos - First-half 2017
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: IPSOS via Globenewswire
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