Good Performance in Terms of Growth, Margins and New Business
PARIS, July 24 /PRNewswire-FirstCall/ -- REVENUE / GROWTH 2nd Quarter 2008 EUR
- Q2 Revenue 1,165 million
Excl. exchange rate impact (1) 1,272 million
- Q2 Organic growth + 5.5%
- Q2 Growth excl. exchange rate impact (2) + 7.1% 1st Half 2008
- H1 Revenue 2,226 million
Excl. exchange rate impact (1) 2,419 million
- H1 Organic growth + 5.4%
Excl. Healthcare + 7.1%
- H1 Growth excl. exchange rate impact (2) + 7.6% OPERATING MARGIN - 1st Half (H1) 334 million
Excl. exchange rate impact (1) 369 million
- Operating margin rate 15.0% WORLD NO. 1 IN NEW BUSINESS
WITH NET WINS TOTALING USD 3 BILLION - Group net income 192 million
- Headline diluted EPS 0.99 EUR
(after OCEANE redemption) (1) 2008 at 2007 exchange rates - (2) 2007 at 2008 exchange rates
Maurice Levy, Chairman & CEO of Publicis Groupe:
"The first half of 2008 has lived up to its promise in terms of organic growth, new business and margins.
An organic growth of 5.4% was very good, though we are still adversely affected by the Healthcare sector (growth would have been + 7.1% without Healthcare).
We are gaining market share in digital communications, media and advertising, as shown by our impressive level of net new business (USD 3 billion) and our No. 1 ranking globally.
We should point out the increasing share of digital, where profitability is improving, but is still below the group's average.
The group's transformation is ongoing. In fact, strategic initiatives such as the launch of VivaKi, our accelerated expansion in digital communications and emerging markets, our creative excellence yet again widely acclaimed in Cannes, and our winner's mindset are the best remedies for the prevailing doom and gloom.
Very early on we embarked on an adaptation of our group's structures, organization, and services to be attuned to new market conditions. Thanks to this strategy, not only are we able to provide constantly improving service to our clients, but we can better resist downturns in the economic cycle.
In a somewhat depressed world economy, and against a backdrop of financial unease, we have every reason to believe that we can better resist by virtue of our strong positions in high-growth markets and sectors.
We are cautiously and reasonably confident in our expectations for the second half of 2008." Good performance of the businesses The first half of 2008 was characterized by a continued deterioration of the general economic environment. The negative impact of the financial crisis, the continuing weakness of the US dollar, and pressure on oil prices, commodities and food products have led to ever-gloomier forecasts firstly in the US and then in Europe.
Despite this very uncertain economic environment, Publicis Groupe performed well in the first half of 2008.
Simplified Income Statement (EUR million) H1 2008 H1 2007 Revenue 2,226 2,248
Operating margin 334 337
Operating margin rate 15.0% 15.0%
Amortization of intangibles (14) (15)
arising on acquisitions
Impairment (4)
Non-current income (expense) 4 9
Operating income 320 331
Net financial costs (42) (38)
Income taxes (84) (88)
Associates 5 6
Minority interests (7) (13)
Group net income 192 198
Earnings per Share(1) EUR0.94 EUR0.95 (1) Earnings Per Share calculations based on 208,854,265
shares in circulation in H1 2007 and 204,487, 173 in H1 2008. After
redemption of the OCEANE 2008 bonds, headline diluted EPS stood at
EUR0.99 (simulation based on redemption of the OCEANE bonds at Jan. 1, 2008), compared with headline diluted EPS of EUR0.92 at June 30,
2007. - H1 2008 Revenue
At June 30, 2008, Publicis Groupe's consolidated revenue was EUR2,226 million compared with EUR2,248 million at June 30, 2007, i.e. a slight decrease mainly due to the weakening of the dollar since the start of the year. Excluding the impact of exchange rates (i.e. 2008 at the 2007 exchange rates), first half revenue would have been EUR2,419 million, i.e. up 7.6%.
Organic growth for the first half-year (after Q1 growth of 5.4%) remained high at + 5.4%.
This growth was achieved thanks to the strong performance and results of all our networks (Publicis, Saatchi & Saatchi, Leo Burnett) and the remarkable success of Digitas and Publicis Groupe Media.
All geographic zones reported satisfactory growth, including the US which achieved 5.5% growth for the period. The situation in Europe was more contrasted, but France turned in excellent performance largely on the strengths of Publicis Conseil and ZenithOptimedia. Certain businesses in the Healthcare sector remain weak. If these activities were factored out, the group's organic growth for H1 2008 would have been + 7.1%.
Our digital offering stepped up a gear with the acquisition and worldwide roll-out of Digitas which not only caused this activity to rocket but confirmed the group's position as world leader in this field.
The digital businesses and the emerging markets continue to drive growth and the H1 2008 results have confirmed the efficiency of the strategic decisions taken to reach our goals for 2010, i.e. 25% of our revenue in digital communications and 25% in the emerging markets.
In H1 2008, the digital businesses accounted for 18.8% of the group's revenue compared with 12.7% in H1 2007.
The emerging markets grew 11.2% to generate 22.3% of our H1 2008 revenue compared with 20.3% in H1 2007.
Breakdown of H1 2008 revenue by geography: (EUR million) Revenue Organic growth
H1 2008 H1 2007 Europe 873 846 + 3.5%
North America 942 1 008 + 5.5%
Asia Pacific 243 235 + 8.8%
Latin America 111 104 + 6.9%
Middle East & Africa 57 55 + 16.9%
Total 2,226 2,248 + 5.4%
- Q2 2008 Revenue
The second quarter saw continued high growth after the good performance in the first quarter.
With consolidated revenue of EUR1,165 million, organic growth in the second quarter stood at + 5.5% and + 6.8% excluding the Healthcare sector. Breakdown of Q2 2008 revenue by geography: (EUR million)
Revenue Organic growth
Q2 2008 Q2 2007 Europe 470 457 + 3.8%
North America 476 516 + 5.8%
Asia Pacific 127 127 + 6.2%
Latin America 59 57 + 7.5%
Middle East & Africa 33 32 + 18.8%
Total 1,165 1,189 + 5.5%
North America and Europe improved their organic growth once again in the second quarter, thereby confirming the relevance of the strategic options taken by the group to generate growth in mature economies at the low end of their cycle.
- Operating margin & Operating income The Operating margin was EUR334 million in the first half of 2008, compared with EUR337 million in the first half of 2007. If the impact of exchange rates were excluded (i.e. 2008 at the 2007 exchange rates), it would have been EUR369 million, up by + 9.5%.
The Operating margin rate was 15% over the period, above the group's expectations, as in the first half of 2007. This percentage margin factors in the dilution effects of recent acquisitions, integration costs and the rapidly-increasing proportion of the digital business where the average margin is lower despite the fact that it is constantly improving. As such, this stability is a reflection of the continuing progress being made by all entities in cost control.
Excluding exchange rate impact, the percentage operating margin would have been 15.2%.
Operating income stood at EUR320 million for the first half-year 2008 compared with EUR331 million for the corresponding period in 2007.
- Net income Group net income was EUR192 million, down 3% on H1 2007 due in particular to the impact of exchange rates.
- Free Cash Flow The group's Free cash flow (excluding changes in working capital requirements) was down on H1 2007 due to the adverse effect of exchange rates, falling from EUR289 million in H1 2007 to EUR266 million in H1 2008.
If the impact of exchange rates were excluded, free cash flow would have been up 4%.
- Shareholders' equity The group's share of consolidated shareholders' equity was EUR1,923 million at June 30, 2008, versus EUR2,198 million at December 31, 2007. This decrease is mainly due to the variation in exchange rates (EUR196 million), buy-backs of 8 million shares (EUR197 million) over the period, and the dividend in respect of 2007 (EUR106 million) which were only partially offset by Net income in the first half-year 2008.
- Net financial debt Net financial debt was EUR1,118 million at June 30, 2008, up EUR281 million from year-end 2007 due to share buy-backs (EUR197 million) and the customary decline in liquidity in the first half-year. The group's average net debt improved by EUR130 million to EUR1,036 million in H1 2008.
If the average debt in H1 2008 were converted at 2007 exchange rates, the average debt and debt reduction would have been EUR927 million and EUR239 million respectively. The debt / equity ratio rose from 0.38 at year-end 2007 to 0.57 at June 30, 2008.
- Exchange rate impact For the purposes of comparison with other firms in the sector who publish their accounts in other currencies, Publicis Groupe proposes the following data: USD GBP
Revenue 3,406 M$ + 14.0% 1,725 M GBP + 13.7%
Operating Margin Growth 511 M$ + 14.1% 259 M GBP + 13.8%
Highlights of H1 2008
- Strategic Initiatives
- Creation and launch of VivaKi: a major strategic initiative
In January, Publicis Groupe announced its cooperation with Google, a turning point marking the group's faith in open-source systems fostering the expansion of numerous forms of collaboration.
In June, the creation of VivaKi was announced on the occasion of the group's Digital Day. The group thus took a big step forward in its transformation by substantially modifying its organization and business approach in order to provide even better service to its clients while leveraging the sector's high growth.
VivaKi unites the power of Digitas, Starcom MediaVest, Denuo and ZenithOptimedia which, while remaining independent, will roll out new services, tools and partnerships.
By pooling Publicis Groupe's analog and digital media assets, the group has positioned itself in a very original manner, thus gaining a decisive edge over its competitors.
By creating VivaKi, with more than 14,000 people and over EUR1.3 billion (USD 2 billion) in revenue, Publicis Groupe has become the market leader under a single management with the means to move fast and consistently in a market where size is essential.
This creation, which is a crucial part of the group's strategy, enables us to: - better meet advertisers' needs by providing solutions that integrate all communications requirements in an efficient, rapid and up-to-date manner. Publicis Groupe's clients will thus be able embrace the future ahead of their competitors; - bring together all our study, research, tools and skill-sets (and talent is scarce in this field) with the VivaKi Nerve Center, thereby providing all our entities with access to cutting edge digital solutions; - leverage VivaKi's size and scale to foster cooperation with the big electronic platforms. In the wake of the Google agreement, several other cooperation agreements have been concluded with digital leaders and these breakthrough agreements will benefit our clients without the need to invest massively in short-lived technology: - Audience on Demand: building upon Yahoo! Microsoft and Platform A (AOL)
- Mobile Communication: with Yahoo! and our subsidiary PhoneValley
- attract and retain the most talented people (in a market short on supply) through the creation of VivaKi's Talent and Innovation unit. The first steps in innovative thinking have been drawn up in areas such as recruitment, networking, mobility, training and diversity.
- Saatchi & Saatchi: JV with Energy Source (China) In addition to the acquisitions announced and completed in the first quarter, we set up Saatchi & Saatchi Energy Source Integrated Interactive Solutions, a joint venture between Saatchi & Saatchi and the Chinese leader in interactive solutions, Energy Source.
- Digitas expansion (India, Singapore, China) During the same period, in order to broaden Digitas' worldwide footprint, the Solutions agency in India and Singapore joined forces with Digitas to become Solutions I Digitas.
- Creativity Once again, the outstanding creative talent of Publicis Groupe has not gone unnoticed.
The group received numerous awards in the various festivals and competitions, such as the highly coveted Grand Prix in Films at the Cannes International Advertising Festival, which crowned a grand total of 101 Lions (including 16 Gold Lions).
At the Clio Awards, the group took the Grand Prix for Innovative Media and 51 Clios in all, five of which were gold awards, on top of an exceptional 81 awards at the One Show.
At all these events, the group was consistently ranked second which, given the relatively small size of the group, gives us a clear top overall ranking.
- New Business: No. 1 worldwide with USD 3 billion Our creative performance, the strong positions of the different networks, the repositioning of the group and its leadership in the world of digital / interactive advertising have confirmed the attractiveness of the group's offering. Publicis Groupe topped the (Lehman Brothers) world rankings in New Business in the first half of 2008 thanks to a number of very spectacular wins and a total of some USD 3 billion. This trend has continued into July.
- Appointments
Further to the creation of VivaKi, several appointments were made: - David Kenny and Jack Klues, both members of the Management Board, have
become Managing Partners of VivaKi, - Renetta McCann has become Head of Talent and Innovation, - Laura Desmond has been named CEO of SMG Worldwide, - Laura Lang has become CEO of Digitas Worldwide - Curt Hecht has been promoted to President of the VivaKi Nerve Center - Events subsequent to June 30, 2008
- Redemption of the 2008 OCEANE bonds
On July 17, 2008, the group redeemed its 2008 OCEANE bonds at a total cost of EUR677 million, including EUR5 million in interest accrued.
In avoiding the potential dilution effect of 23,172,413 shares, this redemption in cash will substantially enhance diluted Earnings Per Share in the second half of 2008 and therefore over the full year as well.
Based on redemption at January 1, 2008, diluted Earnings Per Share at June 30, 2008 would have been EUR0.94, up 6% (compared with the published EPS which remained unchanged).
To fund this redemption, the group drew down EUR450 million of its EUR1,500 million multi-currency syndicated facility, using available cash to fund the remaining EUR227 million. - Recent acquisitions
- Kekst and Company Incorporated
In early July, the group announced the acquisition of Kekst and Company Incorporated, a top-flight US agency that has received worldwide acclaim in public relations and strategic and financial communications.
- Portfolio (Korea - digital communications) On July 23, Publicis Groupe announced the acquisition of Portfolio, a Korean full-service digital marketing agency that has been a pioneer in integrated digital services.
Portfolio, a leading agency in the rapidly expanding Korean market, is joining Publicis Modem, the digital branch of the Publicis worldwide network, to become Publicis Modem Korea.
Outlook All these initiatives, whether in the form of asset portfolio reorganization, acquisitions or agreements, reflect the group's intention to step up its development in high-growth markets such as digital, media, emerging markets and holistic communications.
As such, figures for the first half of 2008 confirm that the group's strategic options work well: superb growth in media and digital communications, good growth of the advertising networks and excellent New Business.
July has been unfolding well, particularly in light of new accounts won (Homebase, Holcim, Disney and numerous accounts in the digital business including Nissan in Europe).
The global economy is marked by the financial crisis and the rising prices of oil, food and commodities. Marketing investments are expected to decrease in certain areas such as the automotive and financial sectors.
The second half of 2008 will be heavily influenced by advertising budgets revolving around the Olympic Games.
Forecasts drawn up by ZenithOptimedia in particular suggest that the growth markets and sectors will offset expected slowdowns. At this point in time, Publicis Groupe is on track and should generate good growth in the second half of 2008.
The early signs regarding 2009 confirm the traditional and anticipated slowing of growth in post-Olympics years. The early trends are encouraging for Publicis Groupe.
In the first half of 2008, margins were higher than expected despite the impact of exchange rates and the increased contribution to revenue of digital communications.
The second half-year looks quite similar, the objective being to consolidate our operating margin at their high level in 2008 and 2009.
About Publicis Groupe Publicis Groupe [Euronext Paris: FR0000130577] is the world's fourth largest communications group. In addition, it is ranked as the world's second largest media counsel and buying group, and is a global leader in digital and healthcare communications. With activities spanning 104 countries on five continents, the Groupe employs approximately 44,000 professionals.
The Groupe offers local and international clients a complete range of communication services, from advertising through three autonomous global advertising networks, Leo Burnett, Publicis, Saatchi & Saatchi and two multi-hub networks, Fallon and 49%-owned Bartle Bogle Hegarty; to media consultancy and buying, through two worldwide networks, Starcom MediaVest Group and ZenithOptimedia; interactive and digital marketing led by Digitas; Specialized Agencies and Marketing Services offering healthcare communications, corporate and financial communications, sustainability communications, shopper marketing, public relations, CRM and direct marketing, event and sports marketing, and multicultural communications.
Web Site: http://www.publicisgroupe.com/ DATASOURCE: Publicis Groupe Services CONTACT: Contacts : Publicis Groupe: Peggy Nahmany, External Communication : +33(0)1-44-43-72-83, ; Martine Hue, Investor Relations : +33(0)1-44-43-65-00,
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