Publicis Groupe Sa · EURONEXT:PUB
Publicis Groupe Sa — FY2019 Earnings Presentation
45 slides from Publicis Groupe Sa's earnings presentation, Feb 6, 2020
Slide 1: Full Year Results 2019
FULL YEAR RESULTS 2019 6 February 2020
Slide 2: Disclaimer
DISCLAIMER Certain information contained in this document, other than historical information, may constitute forward-looking statements or unaudited financial forecasts. These forward-looking statements and forecasts are subject to risks and uncertainties that could cause actual results to differ ma
Slide 3: Full Year 2019 Highlights
FULL 2019 2020 YEAR 2019 FINANCIAL PRIORITIES Q&A HIGHLIGHTS RESULTS & OUTLOOK 2
Slide 4: A pivotal year with the acquisition of Epsilon
1. A PIVOTAL YEAR WITH THE ACQUISITION OF EPSILON Integration largely completed, with Epsilon core activities in building, enriching and activating data connected with every Groupe operation. Epsilon Agency merged with Leo Burnett. CJ Affiliate under strategic review Decisive step to Immediate impac
Slide 5: Organic growth impacted by well-identified challenges
2. ORGANIC GROWTH IMPACTED BY WELL-IDENTIFIED CHALLENGES Severely impacted by: Full year organic growth at • Attrition on traditional business representing c. 200bps impact on FY organic -2.3%, in line with growth indications communicated • Media losses from 2018 • Impact of the repositioning of Pub
Slide 6: Continued strong financial performance
3. CONTINUED STRONG FINANCIAL PERFORMANCE 17.3% operating margin rate (1) (+30bps vs 2018) • Strong investment in talents of c.€100M • Ongoing positive impact of our structure simplification and higher- value services Robust financial ratios while reinvesting in Headline EPS growing by +8.2% (2), re
Slide 7: #1 in new business ranking in 2019
4. #1 IN NEW BUSINESS RANKING IN 2019 New clients selecting the Groupe Net reported wins 2019, estimated billings $bn(1) Existing clients with extended assignments 2.2 1.1 Existing clients with consolidation Comp. 2 Comp. 3 Comp. 1 -0.1 -0.6 (1) Source: JP Morgan estimates 6
Slide 8: Full Year 2019 Highlights
FULL 2019 2020 YEAR 2019 FINANCIAL PRIORITIES Q&A HIGHLIGHTS RESULTS & OUTLOOK 7
Slide 9: Net Revenue
NET REVENUE (EUR million) Q1 Q2 Q3 Q4 FY 2019 net revenue 2,118 2,234 2,577 2,871 9,800 2018 net revenue 2,082 2,198 2,197 2,492 8,969 Reported growth +1.7% +1.6% +17.3% +15.2% +9.3% Organic growth -1.8%(1) +0.1% -2.7% -4.5% -2.3% (1) -1.6% Excluding PHS 8
Slide 10: Q4 Net Revenue by Geography
Q4 NET REVENUE BY GEOGRAPHY 2019 Organic (EUR million) Q4 2019 Q4 2018 vs. 2018 growth Europe 728 753 -3.3% -7.0% North America 1,639 1,260 +30.1% -4.2% Asia Pacific 302 277 +9.0% -2.3% Latin America 107 110 -2.7% +0.9% Middle East Africa 95 92 +3.3% -1.2% Total 2,871 2,492 +15.2% -4.5% 9
Slide 11: FY Net Revenue by Geography
FY NET REVENUE BY GEOGRAPHY 2019 Organic (EUR million) 2019 2018 vs. 2018 growth Europe 2,630 2,622 +0.3% -2.0% North America 5,516 4,795 +15.0% -3.5% Asia Pacific 1,006 924 +8.9% +0.8% Latin America 326 347 -6.1% -4.9% Middle East Africa 322 281 +14.6% +10.0% Total 9,800 8,969 +9.3% -2.3% 10
Slide 12: 2019 Net Revenue Organic Growth by Country
2019 NET REVENUE ORGANIC GROWTH BY COUNTRY > +10% India, Poland, United Arab Emirates +5% to +10% Canada, Malaysia, Thailand 0% to +5% Israel, Italy, Russia, South Africa, Spain Australia, Brazil, China, France, Germany, Indonesia, Japan, < 0% South Korea, United Kingdom, United States 11
Slide 13: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT (EUR million) 2019 2018 Revenue 11,001 9,951 Net revenue 9,800 8,969 EBITDA (1) 2,245 2,049 Operating income 1,659 1,523 Operating income excluding Epsilon transaction costs 1,699 1,523 Non-current income and expenses (1) (2) Net financial expenses (106) (80) Income tax
Slide 14: Operating Margin
OPERATING MARGIN (EUR million) FY 2019 FY 2018 Net revenue 9,800 8,969 Personnel costs (5,957) (5,643) Restructuring costs (116) (104) Other operating expenses (1,586) (1,278) Depreciation (482) (421) Operating margin 1,659 1,523 as a % of Net revenue 16.9% 17.0% Operating margin excl. Epsilon trans
Slide 15: Change in Operating Margin
2 0 1 9 - C H A N G E I N O P E R A T I N G M A R G I N (1) AS A % OF NET REVENUE +50bps 17.5% -10bps 17.4% -120bps +70bps -20bps -20bps +10bps 17.3% 17.0% +30bps +40bps 2018 Reported FX & Structure 2018 At 2019 Restructuring 2018 At 2019 Investment Impact Of Occupancy Variable Other Depreciation Ep
Slide 16: Net Financial Income (Expense)
NET FINANCIAL INCOME (EXPENSE) (EUR million) 2019 2018 BNPP loan, 2021 & 2024 Eurobond, 2023 Eurobond (Sapient acquisition funding) (56) (58) Citi loan, 2025, 2028 & 2031 Eurobond (Epsilon acquisition funding) (58) - Other financial expense net of interest income 95 52 Discount on long term debt (6)
Slide 17: Income Tax and Effective Tax Rate
INCOME TAX AND EFFECTIVE TAX RATE (EUR million) 2019 2018 Reported income taxes 305 285 One-off impacts of US tax reform(1) - 18 Adjusted income taxes 305 303 Effective tax rate 25.0% 24.0% Reversal in income tax on amortization of intangibles arising from acquisitions 51 14 Reversal in income tax o
Slide 18: Headline Earnings Per Share, Diluted
H E A D L I N E E A R N I N G S P E R S H A R E , D I L U T E D (1) 5.02€ +8.9% 4.61€ +8.2% At constant currency & excluding Beat tax 2018 2019 (1) See definition in Supplemental Information 17
Slide 19: Dividend
DIVIDEND €2.30 €2.12 +8.5% €2.00 +6.0% 45.8% 44.9% Dividend 44.4% pay-out (1) 2017 2018 2019 2019 dividend to be submitted to May 27, 2020 AGM’s approval (1) See definition in Supplemental Information 18
Slide 20: Free Cash Flow
FREE CASH FLOW (EUR million) 2019 2018 EBITDA (1) 2,245 2,049 Interests paid and received 11 (3) Repayment of lease liabilities and related interests (480) (432) Tax paid (349) (328) Other items 51 68 Cash flows from operations before change in WCR (2) 1,478 1,354 Capex, net of disposals (1) (225) (
Slide 21: Use of Cash
USE OF CASH (EUR million) 2019 2018 Free Cash Flow 1,647 1,311 Acquisitions (net of disposals) (1) (3,950) (128) Earn-out (123) (130) Buy-out (2) (10) Dividends paid (297) (220) Share buy-back, net of sales 2 1 Sales of treasury shares due to exercise of stock options - 5 Exercise of warrants 5 3 No
Slide 22: Balance Sheet
BALANCE SHEET (EUR million) 2019 2018 Goodwill and intangibles 13,608 9,876 Net right of use 2,122 1,732 Other fixed assets 969 888 Current and deferred tax (498) (560) Working capital (2,969) (2,904) Net assets held for sale 0 83 TOTAL 13,232 9,115 Group equity 7,401 6,853 Minority interests (9) 0
Slide 23: Net Financial Debt
NET FINANCIAL DEBT (EUR million) 2019 2018 Net Financial Debt, average 2,375 1,323 Net Financial Debt, at end of period 2,713 (288) 22
Slide 24: Financial Ratios
FINANCIAL RATIOS Internal 2019 2018 objectives (Average net financial debt + Average Lease liability) / EBITDA 2.1x 1.6x < 2.2x (Net financial debt + Lease liability) / Shareholders’ Equity 0.71x 0.26x < 0.80x EBITDA(1) / Cost of net financial debt & Lease liability 24x 30x > 7x (1) See definitions
Slide 25: Liquidity as of December 31, 2019
LIQUIDITY AS OF DECEMBER 31, 2019 December 31, December 31, 2019 2018 (EUR million) Total Drawn Available Available 364-day revolving credit facilities 165 - 165 165 5-year revolving credit facility (1) 467 - 467 516 5-year syndicated facility (Club Deal) (2) 2,000 - 2,000 2,000 Total Committed Faci
Slide 26: Full Year 2019 Highlights
FULL 2019 2020 YEAR 2019 FINANCIAL PRIORITIES Q&A HIGHLIGHTS RESULTS & OUTLOOK 25
Slide 27: What Our Clients Need
WHAT OUR CLIENTS NEED Differentiate & add Adapt their business model Navigate the increasingly Take back control on their value to their product with to this data led digital-first complex media landscape customer relationship ground-breaking creativity world Deliver Breakthrough Leverage Our Build,
Slide 28: 4 Steps for Our Organic Growth Recovery Roadmap
4 STEPS FOR OUR ORGANIC GROWTH RECOVERY ROADMAP 27
Slide 29: First Step: Stabilise and Progressively Return to Growth
First Step: STABILISE & PROGRESSIVELY RETURN TO GROWTH IN OUR TRADITIONAL ACTIVITIES Activate our country-model across 10 operations to accelerate client cross-fertilisation Leverage our new structure to improve our Leverage our client-centric organization with top clients to fight performance thank
Slide 30: Second Step: Bring Back Publicis Sapient U.S. to Growth
Second Step BRING BACK PUBLICIS SAPIENT U.S. TO GROWTH Strategic repositioning to full DBT through industry verticals • Integration of Publicis Sapient US digital activities in our creative agencies Turnaround Publicis • Disengaging from the long tail to concentrate resources on less Sapient in the
Slide 31: Third Step: Leverage Epsilon's Expertise for All Our Assets
Third Step LEVERAGE EPSILON’S EXPERTISE FOR ALL OUR ASSETS Integration largely complete • One unified organisation: all Groupe data capabilities put under the leadership of Epsilon • One unified product: Epsilon People Cloud, the platform spanning the whole data value chain • Connection of Epsilon t
Slide 32: Fourth Step: Pursue a Disciplined Investment Strategy
Fourth Step PURSUE A DISCIPLINED INVESTMENT STRATEGY Talent: • Promotion of a new generation of leaders and c. €100M invested in our people in 2019 • Transitioning part of the profiles of our talent bench, as reflected in our restructuring costs for 2019 Invest in three • Continuing on the same stra
Slide 33: Outlook
OUTLOOK 2019: A year showing the Organic growth severely impacted by well-identified headwinds two faces of our transformation A differentiated offer demonstrating its attractiveness in transformative pitches - Consistent delivery of strong financial ratios Headwinds to continue to impact short term
Slide 34: Supplemental Information
=) OG PUBLICIS GROUPE Ss Te \\ _ Supplemental information
Slide 35: Net Revenue and Organic Growth Calculation
NET REVENUE & ORGANIC GROWTH CALCULATION (EUR million) Q1 Q2 Q3 Q4 FY 2019 Currency impact 2018 net revenue 2,082 2,198 2,197 2,492 8,969 (EUR million) Q1 Q2 Q3 Q4 FY Currency impact (2) 93 72 65 52 282 GBP (2) 3 0 (2) 7 8 2018 net revenue at 2019 exchange rate (a) 2,175 2,270 2,262 2,544 9,251 USD
Slide 36: 2019 Net Revenue by Sector
2019 NET REVENUE BY SECTOR (1) Other Retail 5% Financial 8% 17% Leisure / Energy / Luxury 8% Automotive Healthcare 15% 10% Food & TMT Beverage 13% 12% Non-Food Consumer Products 12% (1) Based on 3,769 clients representing 88% of net revenue 35
Slide 37: Game Changers in 2019
GAME CHANGERS IN 2019 Net revenue from game changers c. €1,300 million Organic growth of game changers +18% Share of game changers in Groupe net +15% Excluding Epsilon revenue 36
Slide 38: Condensed Consolidated Income Statement
CONDENSED CONSOLIDATED INCOME STATEMENT (EUR million) 2019 2018 Net revenue 9,800 8,969 Pass-through revenue 1,201 982 Revenue 11,001 9,951 EBITDA 2,245 2,049 Depreciation (586) (526) Operating margin 1,659 1,523 Amortization of intangibles arising from acquisitions (204) (69) Impairment / Real esta
Slide 39: 2019 Condensed Consolidated Income Statement
3 8 2019 CONDENSED CONSOLIDATED INCOME STATEMENT Amortization Impairment / change in fair Epsilon of intangibles Real estate value of 2019 acquisition arising from consolidation Main Capital financial Earn-out 2019 (EUR million) P&L costs acquisitions charge Gain/loss assets revaluation Headline Net
Slide 40: 2018 Condensed Consolidated Income Statement
2018 CONDENSED CONSOLIDATED INCOME STATEMENT Amortization Impairment / change in fair of intangibles Real estate value of 2018 arising from consolidation Main Capital financial Earn-out US tax reform 2018 (EUR million) P&L acquisitions charge Gain/loss assets revaluation Impact Headline Net revenue
Slide 41: Gross Debt as of December 31, 2019
GROSS DEBT AS OF DECEMBER 31, 2019 Breakdown by maturity 2024 (EUR million) Total 2020 2021 2022 2023 Onwards Eurobond 2021 (1) (2) 768 768 Eurobond 2023 495 495 Eurobond 2024 (1) (2) 644 644 Eurobond 2025 (1) (2) 774 774 Eurobond 2028 (1) (2) 773 773 Eurobond 2031 (1) (2) 771 771 Medium term loans
Slide 42: Net Debt as of December 31, 2019 by Currency
NET DEBT AS OF DECEMBER 31, 2019 Breakdown by currency (EUR million) Total EUR USD GBP Others Eurobond 2021 (1) (2) 768 768 Eurobond 2023 495 495 Eurobond 2024 (1) (2) 644 644 Eurobond 2025 (1) (2) 774 774 Eurobond 2028 (1) (2) 773 773 Eurobond 2031 (1) (2) 771 771 Medium term loans (1) 1,427 300 1,
Slide 43: Net Debt as of December 31, 2019 by Rate
NET DEBT AS OF DECEMBER 31, 2019 Breakdown by rate (EUR million) Total Earn-out / Buy-out Fixed rate Floatingbrate Eurobond 2021 (1) (2) 768 768 Eurobond 2023 495 495 Eurobond 2024 (1) (2) 644 644 Eurobond 2025 (1) (2) 774 774 Eurobond 2028 (1) (2) 773 773 Eurobond 2031 (1) (2) 771 771 Medium term l
Slide 44: Definitions
DEFINITIONS NET REVENUE: Revenue less pass-through costs which comprise amount paid to external suppliers engaged to perform a project and charged directly to clients. Those costs are mainly production & media costs and out of pocket expenses. ORGANIC GROWTH: Change in net revenue excluding the impa
Slide 45: Contact
CONTACT Press Delphine Stricker, Group Communications Director Tel. + 33 6 38 81 40 00 / Email. delphine.stricker@publicisgroupe.com Investor Relations Alessandra Girolami, Vice-President Investor Relations & Strategic Financial Planning Tel. + 33 1 44 43 77 88 / Email. alessandra.girolami@publicisg