Publicis Groupe SA · EURONEXT:PUB

Publicis Groupe SA — H1 2019 Earnings Presentation

44 slides from Publicis Groupe SA's earnings presentation, Jul 18, 2019

  1. Slide 1: H1 2019 Results

    H1 2019 RESULTS 18 JULY PR oe? SU. ate oar Ld e cae ory ‘P, “es ry ry <¢ AO al e eae - é 5 a “ee Ld gli ‘ °e GoGo § Se Bo oo geeh., - ee M *e Q ° - 8.4 A os Dee oe 5 oy e . on . ‘ PUBLICIS GROUPE 2019

  2. 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

  3. Slide 3: H1 2019 Highlights

    H1 2019 HIGHLIGHTS GROUPE

  4. Slide 4: H1 2019 Highlights

    H1 2019 HIGHLIGHTS  Q2 organic growth of 0.1%, back to positive territory as anticipated  Strong financials in H1 2019, with 40bps improvement in operating margin rate (1), headline EPS up 2.5% (2) and Free Cash Flow remaining at a high level  Closing of Epsilon transaction at compelling price (1

  5. Slide 5: Sequential improvement in topline growth vs Q1

    SEQUENTIAL IMPROVEMENT IN TOPLINE GROWTH VS Q1  Q2 organic growth back in positive territory, as anticipated − Q2 at +0.1%, vs. -1.6%(1) in Q1 showing a sequential improvement − Strong contribution from Q4 2018 new business wins and from game changers at +21% growth − Still mitigated by attrition o

  6. Slide 6: Strong financials in the first half 2019

    STRONG FINANCIALS IN THE FIRST HALF 2019  Operating margin of €652 (1) million, up +5.7%  Operating margin rate at 15.0%, up +40bps (2) − € 108 million in savings − € 48 million reinvested in talents and expertise  Headline earnings per share, diluted : €1.98, +2.5% (3)  Free Cash Flow before ch

  7. Slide 7: Closing of the Epsilon acquisition

    CLOSING OF THE EPSILON ACQUISITION  A one-time opportunity to acquire a unique platform at scale to complete our transformation  Compelling price very good financing conditions − Net value of $3.95 billion − Double-digit accretion (1) to headline EPS (+12.5%) and Free Cash Flow per share (+18.3%),

  8. Slide 8: H1 2019 Net Revenue

    H1 2019 NET REVENUE e e Pe, 0 ry ef, i wf we ° le we oy 0° "2 8 Ss . oe e° %,.: ee 80%. °e Cop. ol? fe . +S eee ee oe 88 ww oe, fe ee Pa ne Te 2 Meee. > thingy *e . U ° "s Ao eee . ’ ~ e . or * fe PUBLICIS GROUPE

  9. Slide 9: Net revenue

    NET REVENUE (EUR million) Q1 Q2 H1 2019 net revenue 2,118 2,234 4,352 2018 net revenue 2,082 2,198 4,280 Reported growth +1.7% +1.6% +1.7% Organic growth -1.8% +0.1% -0.8% Organic growth ex PHS -1.6% +0.1% -0.7% 9

  10. Slide 10: Q2 net revenue by geography

    Q2 NET REVENUE BY GEOGRAPHY 2019 Organic (EUR million) Q2 2019 Q2 2018 vs. 2018 growth Europe 663 641 +3.4% +2.4% North America 1,177 1,179 -0.2% -1.7% Asia Pacific 237 224 +5.8% +2.7% Latin America 78 86 -9.3% -8.7% Middle East Africa 79 68 +16.2% +12.9% Total 2,234 2,198 +1.6% +0.1% 10

  11. Slide 11: H1 2019 net revenue by geography

    H1 2019 NET REVENUE BY GEOGRAPHY 2018 Organic Organic (EUR million) 2019 2018 growth vs. 2017 growth ex PHS Europe 1,296 1,255 +3.3% +1.6% +1.6% North America 2,316 2,321 -0.2% -3.1% -3.0% Asia Pacific 444 423 +5.0% +2.0% +2.0% Latin America 144 158 -8.9% -7.6% -7.6% Middle East Africa 152 123 +23.6

  12. Slide 12: H1 2019 net revenue organic growth by country

    H1 2019 NET REVENUE ORGANIC GROWTH BY COUNTRY Colombia, India, Italy, Singapore, United Arab > +10% Emirates +5% to +10% Israel, Philippines, Canada France, Mexico, Russia, South Africa, United 0 to +5% Kingdom Australia, Brazil, Germany, Greater China, < 0% Indonesia, Japan, Spain, United States 12

  13. Slide 13: H1 2019 Results

    H1 2019 RESULTS GROUPE

  14. Slide 14: Consolidated income statement

    CONSOLIDATED INCOME STATEMENT (EUR million) H1 2019 H1 2018 Revenue 4,868 4,725 Net revenue 4,352 4,280 EBITDA (1) 885 882 Operating margin 612 617 Operating margin excluding transaction costs (2) 652 617 Non-current income and expenses (1) (1) Net financial expenses (20) (36) Income taxes (162) (14

  15. Slide 15: Operating margin

    OPERATING MARGIN (1) (EUR million) H1 2019 H1 2018 Net revenue 4,352 4,280 Personnel costs (2,818) (2,798) Restructuring costs (61) (36) Other operating expenses (588) (564) Depreciation (273) (265) Operating margin 612 617 as a % of Net revenue 14.1% 14.4% Operating margin excl. transaction costs (

  16. Slide 16: Change in operating margin as a % of net revenue

    H1 2019 - CHANGE IN OPERATING MARGIN (1) AS A % OF NET REVENUE +30bps -110bps +220bps -70bps +50bps 15.1% -60bps -20bps +20bps 14.6% 15.0% 14.4% FX and H1 2018 Additional H1 2018 reporting H1 2018 at Restructuring Savings from Occupancy Investment Talent Other H1 2019 Technical Cost costs in game In

  17. Slide 17: Net financial income (expenses)

    NET FINANCIAL INCOME (EXPENSES) (EUR million) H1 2019 H1 2018 2020 BNP Paribas loan, 2021 & 2024 Eurobond, 2023 Eurobond (28) (28) 2025 & 2028 & 2031 Eurobond (1) (4) - Other financial expense net of interest income 50 22 Discount on long term debt (3) (3) Interest on net financial debt 15 (9) Inter

  18. Slide 18: Income tax and effective tax rate

    INCOME TAX AND EFFECTIVE TAX RATE (EUR million) H1 2019 H1 2018 Reported income taxes 136 109 Effective tax rate 25.8% 25.9% Impact of Beat tax = +190bps on Effective tax rate 18

  19. Slide 19: Headline earnings per share, diluted

    HEADLINE EARNINGS PER SHARE, DILUTED (1) € 1.98 +4.8% € 1.89 +2.5% at constant currency & excluding Beat tax H1 2018 H1 2019 (1) See definition in Supplemental Information 19

  20. Slide 20: Free cash flow

    FREE CASH FLOW (EUR million) H1 2019 H1 2018 EBITDA (1) 885 882 Interests paid and received 33 19 Repayment of lease liabilities and related interests (214) (204) Tax paid (190) (149) Other items 42 38 Cash flows from operations before change in WCR (2) 556 586 Capex, net of disposals (1) (65) (86)

  21. Slide 21: Use of cash

    USE OF CASH (EUR million) H1 2019 H1 2018 Free Cash Flow before change in WCR 491 500 Change in WCR (826) (890) Acquisitions (net of disposals) (1) 17 (3) Earn-out (68) (81) Buy-out (1) (5) Dividends paid (8) (5) Share buy-back, net of sales 4 10 Sales of treasury shares due to exercise of stock opt

  22. Slide 22: Balance sheet

    BALANCE SHEET (EUR million) June 30, 2019 June 30, 2018 Goodwill and intangibles 9,964 9,682 Net right of use 1,954 1,777 Other fixed assets 854 823 Current and deferred tax (489) (567) Working capital (2,618) (1,982) TOTAL 9,665 9,733 Group equity 6,692 6,155 Minority interests (9) (1) TOTAL EQUITY

  23. Slide 23: Net financial debt

    NET FINANCIAL DEBT (EUR million) H1 2019 H1 2018 FY 2018 Net Financial Debt, average 550 1,317 1,323 (1) Net Financial Debt, at end of period 74 1,044 (288) (1) H1 2019 proforma after Epsilon: €3,969 million 23

  24. Slide 24: Financial ratios

    FINANCIAL RATIOS Last 12 months 12 months ending Internal ending June. 30, December 31, 2018 objectives 2019 (Average net financial debt + Average Lease liability) / EBITDA 1.5x 1.6x < 2.2x (Net financial debt + Lease liability) / Shareholders’ Equity 0.36x 0.26x < 0.80x EBITDA(1) / Cost of net fina

  25. Slide 25: Liquidity as of June 30, 2019

    LIQUIDITY AS OF JUNE 30, 2019 June 30, 2019 June 30, 2019 Epsilon Proforma after June 30, 2018 before Epsilon acquisition acquisition Epsilon (EUR million) TOTAL DRAWN AVAILABLE AVAILABLE AVAILABLE Committed Facilities Epsilon term loan 1,064 - 1,064 (1,064) - - 364-day revolving credit facilities 1

  26. Slide 26: Strategic update

    STRATEGIC UPDATE GROUPE

  27. Slide 27: Our industry has been disrupted by data and tech

    OUR INDUSTRY HAS BEEN DISRUPTED BY DATA AND TECH Consequences today vary across companies but the need for transformation has never been stronger Publicis’s model designed to address those challenges over €150M Investment in talents in the last 18 months Acquisition of Epsilon Investment in expertis

  28. Slide 28: Slower organic growth in the short term due to two phenomena

    SLOWER ORGANIC GROWTH IN THE SHORT TERM DUE TO TWO PHENOMENA Historical revenue mix penalizing short term growth  Traditional advertising exposure with upper-end of the funnel in brand advertising  c. 35% of our activity (1)  FMCG sector where a handful of clients are cutting their spending  c.

  29. Slide 29: Outlook

    OUTLOOK  Broadly stable net revenue on an organic basis with H2 > H1 2019 OUTLOOK  Operating margin rate: +30bp to +50bp improvement (1)  Headline EPS diluted: 5% to 10% growth (1) (2)  New forecasts to be updated taking into account the positive impact of the integration of Epsilon and the pote

  30. Slide 30: Three levers to come back to growth

    THREE LEVERS TO COME BACK TO GROWTH Become the preferred partner of our clients in their transformation  Deliver what our clients need in this new world: personalized experiences at scale  Capitalize on a USD 1.5 trillion addressable transformation market  Publicis Sapient and Epsilon together to

  31. Slide 31: Conclusion

    CONCLUSION GROUPE

  32. Slide 32: Conclusion

    CONCLUSION  Strong Confidence in the model we are building thanks to New Business track record, Game Changers performance and best in class financials  Conservative approach to growth in the short term due to the cuts in fees from a handful of FMCG clients in the US  Clear plan to return to growt

  33. Slide 33: Merci

    MERCI GROUPE

  34. Slide 34: Supplemental information

    SUPPLEMENTAL INFORMATION . Cry ea oF aoe comets a mele om 8 a ° 8 “Ge rad O54 ae . “ON , e om oy e 2% ag PUBLICIS GROUPE

  35. Slide 35: Net revenue & organic growth calculation

    SUPPLEMENTAL INFORMATION NET REVENUE & ORGANIC GROWTH CALCULATION (EUR million) Q1 Q2 H1 Currency impact 2018 net revenue 2,082 2,198 4,280 (EUR million) Q1 Q2 H1 Currency impact (2) 93 72 165 GBP (2) 3 0 3 2018 net revenue at 2019 exchange rate (a) 2,175 2,270 4,445 USD (2) 90 69 159 2019 net reven

  36. Slide 36: H1 2019 net revenue by sector

    SUPPLEMENTAL INFORMATION H1 2019 NET REVENUE BY SECTOR (1) Non Food Retail consumer 7% Other products 5% 12% Leisure/Energy/ Luxury 8% Automotive 14% Food and beverage 13% Financial 17% Healthcare 11% TMT 13% (1) Based on 2.888 clients representing 88% of net revenue 36

  37. Slide 37: Game changers in H1 2019

    SUPPLEMENTAL INFORMATION GAME CHANGERS IN H1 2019 Net revenue from our game changers c. €580 million Organic growth of game changers (vs H1 2018) +24% Share of game changers in Groupe net revenue 13% 37

  38. Slide 38: Condensed consolidated income statement

    SUPPLEMENTAL INFORMATION CONDENSED CONSOLIDATED INCOME STATEMENT (EUR million) H1 2019 H1 2018 Net revenue 4,352 4,280 Pass-through revenue (1) 516 445 Revenue 4,868 4,725 EBITDA 885 882 Depreciation (273) (265) Operating margin 612 617 Amortization of intangibles arising from acquisitions (27) (34)

  39. Slide 39: Income tax and effective tax rate

    SUPPLEMENTAL INFORMATION INCOME TAX AND EFFECTIVE TAX RATE (EUR million) H1 2019 H1 2018 Reported income taxes 136 109 Income tax on Epsilon transaction costs 10 - Income tax on amortization of intangibles arising from acquisitions 7 6 Income tax on impairment 23 26 Income tax on capital gains / los

  40. Slide 40: Gross debt as of June 30, 2019

    SUPPLEMENTAL INFORMATION GROSS DEBT AS OF JUNE 30, 2019 Breakdown by MATURITY Jul. 2019 – Jul. 2020 – Jul. 2021 – Jul. 2022 – Jul. 2023 – (EUR million) Total Jun. 2020 Jun. 2021 Jun. 2022 Jun. 2023 Onwards Eurobond 2021 (1) (2) 753 753 Eurobond 2023 495 495 Eurobond 2024 (1) (2) 625 625 Eurobond 202

  41. Slide 41: Net debt by currency

    SUPPLEMENTAL INFORMATION NET DEBT AS OF JUNE 30, 2019 Breakdown by CURRENCY (EUR million) Total EUR USD GBP Others Eurobond 2021 (1) (2) 753 753 Eurobond 2023 495 495 Eurobond 2024 (1) (2) 625 625 Eurobond 2025 (1) (2) 744 744 Eurobond 2028 (1) (2) 741 741 Eurobond 2031 (1) (2) 737 737 Medium term l

  42. Slide 42: Net debt by rate

    SUPPLEMENTAL INFORMATION NET DEBT AS OF JUNE 30, 2019 Breakdown by RATE Earn-out / Fixed Floating (EUR million) Total Buy-out rate rate Eurobond 2021 (1) (2) 753 - 753 - Eurobond 2023 495 - 495 - Eurobond 2024 (1) (2) 625 - 625 - Eurobond 2025 (1) (2) 744 - 744 - Eurobond 2028 (1) (2) 741 - 741 - Eu

  43. Slide 43: 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

  44. Slide 44: Contact

    CONTACT Press Delphine Stricker Tel. + 33 1 44 43 72 83 / Email. [email protected] Investor Relations Alessandra Girolami, Vice-President Investor Relations & Strategic Financial Planning Tel. +33 1 44 43 77 88 / Email. [email protected] Chi-Chung Lo, Investor

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