Publicis Groupe: First Half 2021 Results
Full recovery with all KPIs exceeding 2019 levels
- Q2 organic growth at +17.1%, more than recovering vs. Q2 2020 at -13.0%
- New acceleration in the U.S. at +15.2%, with Epsilon at +31.1% and Publicis Sapient at +27.0%
- Continued momentum in Asia at +13.6%, Europe rebounding at +23.0%
- U.S. and Asia at +7% organic growth vs. 2019
- Full recovery in H1 overall
- Organic growth at +9.7% vs. -8.0% in H1 2020
- All-time high operating margin rate at 16.5% in a first-half
- Growth of +27% in Headline EPS at €2.23 and +22% in Free Cash Flow1 at €605m
- Number 1 in rankings in New Business2 in H1
- Upgrade of all 2021 guidance KPIs with full recovery expected in one year instead of two: organic growth at 7%, operating margin rate at 17%, Free Cash Flow between €1.2bn and €1.3bn
PARIS–(BUSINESS WIRE)–Regulatory News:
Publicis Groupe (Paris:PUB):
Q2 2021 Revenue
| € 2,539 M | |
| +17.1% | |
| +10.7% |
H1 2021 Results
| H1 2021 | 2021 vs 2020 |
| 5,493 | +4.1% |
| 4,931 | +3.3% |
| +9.7% |
|
| 1,052 | +14.0% |
| 815 | +31.0% |
| 16.5% | +350bps |
| 555 | +33.1% |
| 2.23 | +27.4% |
| 605 | +22.2% |
Arthur Sadoun, Chairman and CEO of Publicis Groupe:
“In the first half of the year, we had a very strong performance thanks to our model in an improving business environment.
Not only did we fully recover the revenue lost in 2020, but all of our KPIs over the first half exceeded 2019 levels.
In Q2, we posted +17.1% organic growth, improving by 2% compared to 2019, despite the effects of the pandemic.
This overperformance was largely driven by the U.S. and Asia, which both grew +7% versus 2019.
Our U.S operations posted 15.2% organic growth in Q2, with Epsilon, PMX and Sapient all delivering above +25%. Asia also accelerated further with +13.6% organic growth. Europe rebounded from a low base to +23%, mirroring the progressive lifting of lockdowns.
In H1 overall, we posted organic growth of +9.7%, leading to an operating margin rate at 16.5%, the group’s highest ever for a first half period, while our free cash flow up 22%, at €605 million.
What is more, we once again topped new business rankings for the first half of the year, thanks to a strong run of wins.
For the remaining part of the year, our ability to capture a disproportionate part of our clients’ investment in data and technology means we are in a position to upgrade our 2021 guidance. We now expect to totally recover to pre-pandemic levels, a year ahead of our initial expectations, with full year organic growth at 7% and full recovery in H2, and an operating margin of 17%, provided there are no major deteriorations in the global sanitary situation.
I’d like to thank our teams for their incredible efforts in this first half of the year, and our clients for their trust and partnership. In H2 we are focused on the execution of our plan, in a context that remains challenging in many parts of the world. »
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Publicis Groupe’s Supervisory Board met on July 21, 2021, under the chairmanship of Maurice Lévy, to examine the 2021 first semester accounts presented by Arthur Sadoun, CEO and Chairman of the Management Board.
KEY FIGURES
| EUR million, except per-share data and percentages | H1 2021 | H1 2020 | 2021 vs 2020 |
| Data from the Income Statement and Cash flow Statement |
|
|
|
| Net revenue | 4,931 | 4,774 | +3.3% |
| Pass-through revenue | 562 | 504 | +11.5% |
| Revenue | 5,493 | 5,278 | +4.1% |
| EBITDA | 1,052 | 923 | +14.0% |
| % of Net revenue | 21.3% | 19.3% | +200bps |
| Operating margin | 815 | 622 | +31.0% |
| % of Net revenue | 16.5% | 13.0% | +350bps |
| Operating income | 598 | 254 | +135% |
| Net income attributable to the Groupe | 414 | 136 | +204% |
| Earnings Per Share (EPS) | 1,68 | 0.57 | +195% |
| Headline diluted EPS (1) | 2.23 | 1.75 | +27.4% |
| Free Cash Flow before change in working capital requirements | 605 | 495 | +22.2% |
| Data from the Balance Sheet | June 30, 2021 | Dec. 31, 2020 |
|
| Total assets | 29,079 | 30,161 |
|
| Groupe share of Shareholders’ equity | 7,690 | 7,182 |
|
| Net debt (net cash) | 1,362 | 833 |
|
(1) Net income attributable to the Groupe, after elimination of impairment charges, amortization of intangibles arising on acquisitions, the main capital gains (or losses) on disposals, change in the fair value of financial assets, the revaluation of earn-out costs, divided by the average number of shares on a diluted basis
NET REVENUE IN Q2 2021
Publicis Groupe’s net revenue in Q2 2021 was 2,539 million euros compared to 2,293 million euros in Q2 2020, up by +10.7%. Exchange rate variations had a 125 million euros negative impact. The acquisitions (net of disposals) contributed 2 million euros to net revenue.
Organic growth was +17.1% in Q2 2021. This implies a recovery ratio of 102%3 over the period, after a -13.0% decline in Q2 2020 when the Groupe was very impacted by the effects of the Covid-19 pandemic. All regions strongly recovered in the second quarter and posted double-digit organic growth. Q2 came ahead of expectations reflecting two main factors. First, an improving global context, characterized by mass re-openings in Europe and a continued uplift in the U.S. economy. Second, the strength of the model, which enabled the Groupe to continue to capture the ongoing shift in clients’ investment towards data management, digital media, direct-to-consumer channels and commerce in general.
Breakdown of Q2 2021 Net revenue by region
| EUR | Net revenue | Reported | Organic | Recovery | |
| million | Q2 2021 | Q2 2020 | growth | growth | Ratio3 |
| North America | 1,527 | 1,458 | +4.7% | +15.1% | 106% |
| Europe | 634 | 510 | +24.3% | +23.0%4 | 94%4 |
| Asia Pacific | 253 | 215 | +17.7% | +13.6% | 107% |
| Middle East & Africa | 71 | 60 | +18.3% | +22.8% | 94% |
| Latin America | 54 | 50 | +8.0% | +15.9% | 92% |
| Total | 2,539 | 2,293 | +10.7% | +17.1% | 102% |
Net revenue in North America was up by +15.1% on an organic basis in the second quarter (+4.7% on a reported basis including the negative impact of the US Dollar/ Euro exchange rate). This strong performance was driven by a +15.2% organic growth in the U.S., accelerating from the +5.1% posted in Q1. The recovery ratio in the U.S. is at 107%, implying a 7% growth compared to 2019 level. In the U.S., Q2 saw a particularly high demand for digital media, first party data management and direct-to-consumer products and services. In this context, Epsilon was up by +31.1% and Publicis Sapient by +27.0% organically. The same trend was visible in the Groupe’s digital media unit PMX, which supported overall media growth. Health operations grew double digit again this quarter. Creative activities were positive, showing sequential improvement after being flat in Q1, with notably a strong growth in production activities.
Activities in Europe rebounded from a low base and the region recovered most of the value lost in 2020 with organic growth at +23.0%4, mirroring the progressive lifting of lockdowns (+24.3% on a reported basis). U.K. operations returned to positive growth at +10.0% organic. In France, all activities bounced back strongly, with net revenue up by +30.6%5. Germany accelerated to +9.6% organic growth while Italy was up by +36.9%.
Asia Pacific was up by +13.6% on an organic basis (+17.7% reported), accelerating in Q2. This translated into a strong recovery ratio of 107% after an organic growth of -5.7% in Q2 2020. China reported an organic growth of +8.0%, Australia of +7.3% and India of +35.4%.
Net revenue in the Middle East and Africa region was up by +22.8% on an organic basis (+18.3% reported).
Net revenue in Latin America was up by +15.9% on an organic basis, translating into a recovery ratio of 92% as the region remained impacted by the sanitary situation. Growth on a reported basis was +8.0%, as the impact from currencies in the region remained negative.
NET REVENUE IN H1 2021
Publicis Groupe’s net revenue for the first half 2021 was 4,931 million euros, up by +3.3% compared to 4,774 million euros in H1 2020. Exchange rate variations over the period had a negative impact of 276 million euros. Acquisitions (net of disposals) have a negative impact of 1 million euros on net revenue.
Organic growth was +9.7% in H1 2021. This implies a recovery ratio of 101%6 over the period, after a -8.0% decline in H1 2020. Following an organic growth of +2.8% in the first quarter, the Groupe accelerated to +17.1% in the second quarter. In H1 2021, all regions posted positive organic growth.
Breakdown of H1 2021 net revenue by sector
| Automotive | 16% | |
| Financial | 15% | |
| TMT | 14% | |
| Healthcare | 13% | |
| Food and beverage | 12% | |
| Non Food consumer products | 12% | |
| Retail | 9% | |
| Public sector / Other | 4% | |
| Energy/ Manufacturing | 3% | |
| Leisure/ Travel | 3% |
Based on 3,250 clients representing 92% of the Groupe’s net revenue.
Breakdown of H1 2021 net revenue by region
| EUR | Net revenue | Reported | Organic | Recovery | |
| million | H1 2021 | H1 2020 | growth | growth | Ratio8 |
| North America | 3,032 | 3,013 | +0.6% | +9.7% | 106% |
| Europe | 1,195 | 1,088 | +9.8% | +10.0%7 | 92%7 |
| Asia Pacific | 470 | 434 | +8.3% | +9.8% | 106% |
| Middle East & Africa | 133 | 135 | -1.5% | +4.3% | 92% |
| Latin America | 101 | 104 | -2.9% | +12.0% | 94% |
| Total | 4,931 | 4,774 | +3.3% | +9.7% | 101% |
Net revenue in North America was up by +9.7% on an organic basis in the first half (+0.6% on a reported basis including the negative impact of the US Dollar/ Euro exchange rate). This strong performance was driven by a +10.0% organic growth in the U.S. reflecting a solid Q1 (+5.1%) and an acceleration to +15.2% in Q2. Overall, the recovery ratio in the U.S. was 106%8, representing a growth of +6% compared to H1 2019.
Europe rebounded with a +10.0% organic growth in H1 (+9.8% on a reported basis). Excluding the impact of the Groupe’s outdoor media activities and the Drugstore in France, that were closed in Q2 2020, the organic growth in Europe is +9.7%, representing a recovery ratio of 96%. All countries bounced back although the performance remained mixed, reflecting different activity mix, local economic situations and variable comparable basis in H1 2020. The UK was positive at +3.6% organic, France at +17.2%9, Germany at +7.8% and Italy up by +28.2%.
Asia Pacific net revenue was up by +9.8% on an organic basis (+8.3% reported). China reported an organic growth of +5.8%, Australia was up by +5.1% on an organic basis and India by +22.6%.
Net revenue in the Middle East and Africa region was up by +4.3% on an organic basis (-1.5% reported).
Net revenue in Latin America was up by +12.0% on an organic basis. It was down by -2.9% on a reported basis, as the negative impact from currencies in the region continued to be significant. Brazil grew by +11.7% organically and Mexico was almost flat at -0.4%.
ANALYSIS OF H1 2021 KEY FIGURES
Income Statement
EBITDA amounted to 1,052 million euros in H1 2021, compared to 923 million euros in H1 2020, up by 14.0%. This translates into a margin rate of 21.3% of net revenue (+200 basis points compared to H1 2020 and +100bps compared to H1 2019).
- Personnel costs totaled 3,174 million euros at June 30, 2021, down by 1.6% from 3,224 million euros in H1 2020. This evolution reflects the impact of the cost reduction plan launched in 2020 when the crisis started, partly offset by the continued investment in the Groupe’s talents. As a percentage of net revenue, personnel expenses represented 64.4% in H1 2021, down by 310 basis points compared to 67.5% in H1 2020. This decrease partly reflects the strong ramp up in net revenue in the first half that was not immediately matched by a rise in costs. Fixed personnel costs were 2,779 million euros and represented 56.4% of net revenue versus 59.9% in H1 2020. On the other hand, the cost of freelancers increased by 28 million euros in H1 2021, in parallel with the uplift in activity, representing 169 million euros. Provision for bonus increased by 65 million euros to reach 182 million euros in H1 2021, reflecting the good performance achieved. Restructuring costs reached 12 million euros, a significant and expected decrease vs. 69 million euros in H1 2020.
- Other operating expenses (excluding depreciation & amortization) amounted to 1,267 million euros, compared to 1,131 million euros in H1 2020. This represents 25.7% of net revenue compared to 23.7% in H1 2020. This includes a rise in cost of sales for 48 million euros as a couple of large outdoor engagements have been extended for a short-term period. The related minimum payments were accounted directly in other operating expenses rather than as a right of use and lease liability. This increase was partly offset by a decline in other G&A, notably in travel expenses that continued to be down year-on-year versus H1 2020.
Depreciation and amortization charge was 237 million euros in H1 2021 compared to 301 million euros in H1 2020, down by 21.3%. This decrease of 64 million euros largely reflects the impact of the short-term contracts described above in other operating expenses.
As a result, the operating margin amounted to 815 million euros, up by 31.0% compared to H1 2020. This represents an operating margin rate of 16.5% in the first half 2021, up by 350 basis points from 13.0% in H1 2020 and by 150 basis points from the 15.0% in H1 2019 (excluding Epsilon’s transaction costs).
Operating margin rates by geographies were 19.2% in North America, 11.0% in Europe, 19.4% in Asia-Pacific, 5.3% in Middle East/Africa and 2.0% in Latin America.
Amortization of intangibles arising from acquisitions totaled 126 million euros in H1 2021, down by 16 million euros versus H1 2020. Impairment losses amounted to 92 million euros, a reduction of 139 million euros versus H1 2020. This decrease reflects the advanced stage of the Groupe’s real estate consolidation plan “All in One”, which is leading to a reduction in the number of sites, while allowing better collaboration between the teams. In addition, net non-current income is positive at 1 million euros compared to 5 million euros in H1 2020.
Operating income totaled 598 million euro in H1 2021, after 254 million euro in H1 2020.
The financial result, comprising the cost of net financial debt and other financial charges and income, is a charge of 55 million euros in H1 2021 compared to 90 million euros last year. The net charge on net financial debt was 45 million euros in H1 2021, including 40 million euros related to Epsilon’s acquisition debt. It compared to a charge of 48 million euros in H1 2020. Other financial income and expenses were a charge of 5 million euros in H1 2021, notably composed by 35 million euros interest on lease liabilities and 32 million in income from the fair value remeasurement of Mutual Funds. In H1 2020, other financial income and expenses were a charge of 44 million euros, including 40 million euros of interest on lease obligations and a charge of 4 million euros from the fair value remeasurement of Mutual Funds.
The revaluation of earn-out payments amounted to a charge of 5 million euros at end-June, compared to an income of 2 million euros in H1 2020.
The tax charge is 135 million euros in H1 2021, corresponding to a forecast effective tax rate of 24.7% in 2021, compared to 39 million euros in H1 2020, corresponding to a forecast effective tax rate of 25.0% in 2020.
The share in the profit of associates is not significant in H1 2021, compared to a loss of 2 million euros in H1 2020.
Minority interests were a loss of 6 million euros in Groupe results in H1 2021 compared to a loss of 13 million euros in the previous year.
Overall, net income attributable to the Groupe was 414 million euros at June 30, 2021, compared to 136 million euro at June 30, 2020.
Free Cash Flow
| EUR million | H1 2021 | H1 2020 |
| EBITDA | 1,052 | 923 |
| Repayment of lease liabilities and related interests | (179) | (234) |
| Investments in fixed assets (net) | (50) | (73) |
| Financial interest paid (net) | (82) | (81) |
| Tax paid | (163) | (74) |
| Other | 27 | 34 |
| Free cash-flow before changes in WCR | 605 | 495 |
The Groupe’s free cash flow, before change in working capital requirements, is up strongly, by 110 million euros compared to H1 2020, at 605 million euros. Repayment of lease liabilities and related interests amounted to 179 million euros. Net investments in fixed assets have decreased by 23 million euros. Financial interest paid mostly include interests on the acquisition debt of Epsilon, and totalled 82 million euros. Tax paid amounted to 163 million euros, up compared to 74 million euros in H1 2020. This reflects both the rise in the Groupe operating income and a catch up effect from some postponements in 2020 for tax payment in several countries.
Net debt
Net financial debt amounted to 1,362 million euros as of June 30, 2021 compared to 833 million euros as of December 31, 2020. The Groupe’s average net debt in H1 2021 amounted to 1,616 million euros compared to 3,684 million euros in H1 2020.
ACQUISITIONS AND DISPOSALS
There was no significant transaction on the period.
POST CLOSING EVENT
On July 15, 2021, Publicis announced the acquisition of CitrusAd, a software as a service (SaaS) platform optimizing brands marketing performances directly within retailer websites. CitrusAd’s onsite expertise complemented with Epsilon’s offsite retail media offering, both powered by the CORE ID, uniquely positions Publicis Groupe to lead the new generation of identity-led retail media, with transparent measurement validated by transaction.
In a fast-growing retail media channel set to double in the next 5 years from c. $30bn annually already, this will enable Publicis Groupe clients to accelerate their growth in this dynamic channel, give them full visibility on the consolidated performance of their media investments and an unparalleled access to highly-qualified first-party data from retailers, equipping them for a cookieless world.
OUTLOOK
In the first half 2021, the Groupe totally recovered the revenue lost in the same period in 2020, posting a +9.7% organic growth after -8.0% in H1 2020, thanks to the strength of its model in an overall improving business environment.
For the full year 2021 and assuming no major deterioration in health situation, the Groupe now expects to be in a position to fully recover its 2020 organic decline of -6.3%, one year ahead of its initial expectations. This implies an organic growth of 7% for 2021.
Regarding operating margin, the Groupe upgrades its guidance for the full year 2021 after an exceptionally strong performance in the first half. 2021 operating margin will come back to pre-pandemic levels, at 17%, while the Groupe will continue to invest in talents and product in the second half, to prepare future growth.
The Groupe also upgrades its 2021 guidance for Free Cash Flow before working capital requirement, which will be between 1.2 billion euros and 1.3 billion euros, further contributing to the Groupe deleveraging.
CSR
Publicis Groupe has continued making progress on its CSR roadmap, particularly in subjects of leading priority.
In March 2021, Publicis Groupe’s climate change targets for 2030 were validated by the Science Based Targets initiative (SBTi). The Groupe wants to achieve carbon neutrality by 2030. The action plan to do this is based on three levers; the drastic reduction of all impacts by 47% for scopes 1 & 2 and by 14% for scope 3, the use of 100% renewable energy from direct sources before 2030 and, as a last resort, the use of carbon offsetting for unavoidable impacts. In addition, our proprietary tool for evaluating the impacts of campaigns and projects, A.L.I.C.E (Advertising Limiting Impacts & Carbon Emissions), is currently being deployed in order to better assist clients in these areas.
The global pandemic has accelerated the digital transformation of the Groupe’s customers, who must also integrate sustainability issues into their activities. Climate change and social justice issues are now important in the criteria of citizen-consumers when they make their choices. At the same time, and as the European regulatory context progresses, we observe stronger expectations for the future being expressed by stakeholders, with more precise questions coming from investors and shareholders. In this context, Publicis Groupe announced on 26 May 2021 the creation of a new Supervisory Board committee dedicated to environmental, societal and stakeholder issues; this ESG Committee is chaired by Suzy LeVine.
Equality and inclusion, the fight against racism and for social justice remained central during the first half of the year. On 2 and 3 June 2021, the ‘Pause For Action’ days were held for the second year and provided an opportunity to share progress and good practice across the Groupe in the areas of diversity, equality and inclusion, and to discuss the day-to-day work that is essential in agencies in terms of talent retention and career development. The 2nd of June was dedicated to a global review of the current situation and practices, and the 3rd of June was dedicated to the situation in the United States.
Employee health remained a strong internal focus, with different situations between countries and sometimes painful consequences for our employees, such as in India where many of our employees were severely affected. The protection of all employees is an absolute priority, by following national confinement guidelines and recommended barrier actions. Local HR/Talent teams remain vigilant with highly structured recovery plans, ensuring that teleworking is combined with a gradual return to the office at various sites where possible.
The Marcel internal platform has become a unifying space, with quarterly plenary sessions led by Arthur Sadoun, Chairman of the Management Board, and monthly sessions with country managers and their Comexes. During this period of uncertainty, the objective is to maintain a close and regular link with all employees and to answer their questions. Employees have continued to benefit from individual support programmes to look after their physical and mental health, and have wide access to many online training programmes.
In April 2021, Publicis Groupe announced a partnership between the Women’s Forum for the Economy & Society and the Positive Economy Institute, as well as a change in the governance of the Women’s Forum with Audrey Tcherkoff, Executive Chair of the Positive Economy Institute, also appointed Executive Director of the Women’s Forum. The creation of a Global Advisory Council has also been launched in order to give even greater visibility to the Women’s Forum initiatives.
In June 2021, VivaTech took place in a hybrid format, with a physical event gathering more than 26,000 participants in Paris (capacity restricted for health reasons), and digital sessions during 3 days gathering more than 100,000 participants including prestigious guests from the Tech industry and innovative start-ups.
The CSR actions of the Groupe and its agencies are publicly accessible in the CSR section of the Groupe’s website, and the data is summarised in the CSR Smart data section.
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Contacts
Publicis Groupe
Delphine Stricker
Corporate Communications
+ 33 (0)6 38 81 40 00
[email protected]
Alessandra Girolami
Investor Relations
+ 33 (0)1 44 43 77 88
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Brice Paris
Investor Relations
+ 33 (0)1 44 43 79 26
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