2004 Earnings. Analyst Meeting Paris, March 9, 2005

Transcription

1 2004 Earnings Analyst Meeting Paris, March 9, 2005

2 Publicis Groupe 2004 Summary 1

3 2004 Summary All Indicators Head Up +4% +6.7% 3,825 Organic growth % at constant currencies ( millions) ( millions) 2004 revenues Operating income* +110 bp +40% 15.4% 15% target exceeded 210 Above consensus +55% at constant currencies ( millions) Operating margin Net income * Before amortization of acquisition-related intangibles 2

4 Summary All Indicators Head Up % % Diluted EPS Dividend 299 ( millions) 531 over 2 years ( millions) Working Capital improved Net debt-to-equity ratio

5 Summary Highlights Business Segments Creation of Publicis Groupe Media (PGM), no. 1 worldwide in media buying and media consultancy. Launch of Publicis Healthcare Communications Group (PHCG), the world's no. 1 agency in the field. Creation of Publicis Events Worldwide, specializing in event-related communications.

6 Summary Highlights Creative Product No.2 at 2004 Cannes Festival with 67 Lions No.1 at 2004 EFFIE Awards (US) No.2 in the Gunn Report for 2004 and for the 6 years from 1999 to 2004

7 Summary Highlights New Business Record net New Business in 2004: $4.4 billion ( 3.5 billion) 7 accounts $100 million No.2 worldwide for net New Business (Lehman Brothers 2004 rankings)

8 Summary Main Accounts Booked Over the Year Advertising/SAMS Sanofi-Aventis (global) EDF (France) Toyota Prius (global) Fromageries Bel (Europe) GM/Cadillac (China) Zurich Financial (global) Petsmart (US) Ritz Carlton Hotels (global) Media Nestlé (global) Mars / Masterfoods (US) Oracle (US) O2 (UK) Renault (Spain) Levitra (US) Novartis (global) P&G Respiratory Brands (US) Korea Telecom (Korea) Kraft Foods (UK, Sweden) GM Out-of-Home (US) P&G Media Planning (US)

9 Summary Highlights Corporate and Financial Inclusion in CAC 40 index Balance sheet simplified Improved working capital: success of the Focus on Cash program Successful debt reduction

10 Revenues Reminder ( million) ,863 3,825 Organic growth : +4% Revenue change : - 1 % Very few changes in the scope of consolidation

11 Revenues By Geography By Business Asia Pacific 9.9% Latin America 4.1% RoW 2.0% North America 42.7% Media 23% Advertising 55% Europe 41.3% SAMS 22%

12 2004 Financial Statements 11

13 Impact of Exchange Rates 12

14 Impact of Exchange Rates in Performances affected by exchange rate variations (mainly for the US dollar) Change in average euro values US$ -9% +2% Brazilian real -5% Mexican peso -13% Chinese yuan -9% Revenues by currency (2004) other 21% 27% 10% $ 42%

15 14 Impact of Exchange Rates on Income Translation impact into euros on 2003 financials: Revenues ( 183m) Operating income ( 29m) Net income ( 15m) This does not however affect margin rates.

16 Impact of Exchange Rates on the Balance Sheet 15 In 2004, exchange-rate variations reduced shareholders' equity by ( 106) million The impact should be more limited in 2005 with a euro/dollar swap in place

17 Statement of Income 16

18 17 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Operating income before amortization of intangibles on acquisitions Amortization of intangibles arising on acquisitions (29) (31) Impairment of intangibles arising on acquisitions (123) - Operating income Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items Exceptional items 23 (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income 6 4 of non-consolidated companies Goodwill amortization (188) Minority interests (26) Group net income 210 (113) (24) 150

19 18 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Operating income before amortization of intangibles on acquisitions Payroll expense/revenues down Amortization of intangibles arising on acquisitions (29) (31) Impairment of intangibles arising on acquisitions 100 (123) bp - Operating income from 58.4% 438to 57.4% 522 Net financial costs impact of earlier (39) restructuring (60) Income of cons. companies bef. taxes & excep. items despite million 462 Exceptional items restructuring 23 charges (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income of non-consolidated companies 6 4 Goodwill amortization (188) (113) Minority interests (26) (24) Group net income

20 19 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Operating income before amortization of intangibles on acquisitions Amortization of intangibles arising on acquisitions (29) (31) Impairment of intangibles arising on acquisitions (123) - Operating income Operating margin: Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items up 110 bp 399to 15.4% 462 Exceptional items 23 (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income of non-consolidated companies 6 4 Goodwill amortization (188) (113) Minority interests (26) (24) Group net income

21 20 Further Rise in Operating Margin Operating margin (operating income*/revenues): % % bp The rise observed in the 1st half of 2004 continued throughout the year. Operating margin up in all geographical areas: Europe +200 bp North America +60 bp Rest of world +100 bp

22 Operating Income* and Operating Margin A sound and credible base for achieving our target of 17% in % 15.4% Operating Margin (% of revenues) 15.5% 14.1% 14.7% Operating Income* ( m) 15% * Before amortization of acquisition-related intangibles 21

23 22 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Operating income before amortization of intangibles on acquisitions Amortization of intangibles arising on acquisitions (29) (31) Impairment of intangibles arising on acquisitions (123) - Operating income Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items Exceptional items 23 (7) Impairment Income taxes (134) (172) Net change in deferred taxes related to capital gains of intangibles on CLN/OBSA transactions (brands, client lists, Net income of consolidated companies mainly 418 Nelson 283 Equity in net income and Frankel) 6 4 of non-consolidated companies Goodwill amortization (188) Minority interests (26) Group net income 210 (113) (24) 150

24 23 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Net interest Operating income before amortization of 590 intangibles on acquisitions expense 553 down 21 million Amortization of intangibles arising on acquisitions (29) (31) Impairment of intangibles arising on acquisitions (123) - Operating income Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items Exceptional items 23 (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income 6 4 of non-consolidated companies Goodwill amortization (188) Minority interests (26) Group net income 210 (113) (24) 150

25 24 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses Capital gain on redemption (921) 26(932) Operating income before depreciation & of amortization the debt component 707 of 677 Depreciation and amortization expense (excluding OBSAs and sale of CLN goodwill and intangibles arising on acquisitions) (117) (124) Discontinued business (3) Operating income before amortization of & other intangibles on acquisitions Amortization of intangibles arising on acquisitions (29) 23 (31) Impairment of intangibles arising on acquisitions (123) - Operating income Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items Exceptional items 23 (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income 6 4 of non-consolidated companies Goodwill amortization (188) Minority interests (26) Group net income 210 (113) (24) 150

26 25 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) 2004 (117) tax rate: (124) Operating income before amortization of 33.8% intangibles on acquisitions further reduction Amortization of intangibles arising on acquisitions (29) (31) of 400bp Impairment of intangibles arising on acquisitions (123) - (excl. exceptional items) Operating income Net financial costs (39) (60) Income of cons. companies bef. taxes & excep. items Exceptional items 23 (7) Income taxes (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income 6 4 of non-consolidated companies Goodwill amortization (188) Minority interests (26) Group net income 210 (113) (24) 150

27 26 Tax Charge in 2004 Effective tax rate: 33.8% Loss carryforwards for which no tax credit had been recognized at December 31, 2004: 460 million (incl. 260 million originated in France). Exceptional item: recovery of 130 million deferred tax liabilities as a consequence of accounting for the bond component of bonds with attached equity warrants (OBSAs).

28 27 Consolidated Statement of Income ( million) Revenues 3,825 3,863 Personnel expenses (2,197) (2,254) Other operating expenses (921) (932) Operating income before depreciation & amortization Depreciation and amortization expense (excluding goodwill and intangibles arising on acquisitions) (117) (124) Operating income before amortization of intangibles on acquisitions 100 amortization of goodwill Amortization of intangibles arising on acquisitions (29) (31) 88 million impairment Impairment of intangibles arising on acquisitions (123) - Operating income charge on small 438Publicis 522 Net financial costs Worldwide units (39) acquired (60) Income of cons. companies bef. taxes & excep. before items Exceptional items (in Europe, Latin 23 America (7) Income taxes and Asia) (134) (172) Net change in deferred taxes related to capital gains on CLN/OBSA transactions Net income of consolidated companies Equity in net income of non-consolidated companies 6 4 Goodwill amortization (188) (113) Minority interests (26) (24) Group net income

29 28 Vigorous Rise in 2004 EPS ( ) 0.82 Basic EPS +40% 1.15 Diluted EPS * Before amortization of goodwill, impairment of acquisition-related intangibles and excl. exceptional items (OBSAs/CLN) % Diluted EPS % data restated to include amortization of acquisition-related intangibles previously excluded

30 Financing and Balance Sheet 29

31 30 Action to Simplify the Balance Sheet 1st Stage 2004: CLN and OBSAs Simplification of the balance sheet Redemption of the debt component of bonds with attached equity warrants (OBSAs) ( 475 million on the balance sheet) and sale of CLN ( 380 million on the balance sheet) Rise in shareholders' equity as a result of reclassification of equity warrants ( 118m net of deferred tax)

32 31 Action to Simplify the Balance Sheet 2nd Stage in 2005 Successful bond issue (January 2005) 750 million maturing % coupon oversubscribed 3 times. Early redemption of 2018 OCEANE convertible bonds (February 2005) Amount: 464 million (62% of bonds) 6,633,921 bonds still currently outstanding.

33 Results of Balance Sheet Simplification 32 Simplification: put options (2006, 2010 and 2014) on the 2018 OCEANE now only apply to the residual amount of 274 million. Liquidity: Longer maturities Cash surplus ( 750 million 464 million) will be used for further debt reduction. Dilution: elimination of 11 million potential shares. Interest expense under IFRS: debt at 7.37% (OCEANE) replaced with debt at 4.24% in an amount of 464 million

34 Debt Ratios Net debtto-equity ratio* Net debt ( m) 1,330 1,553 1,166 1, Dec June Dec June Dec Net debt/ EBITDA * Including minority interests and ORANEs. 33

35 34 Management of US Dollar Risk In January 2005, Publicis Groupe swapped the euro-denominated bonds for US dollars : 750 million swapped into US dollars 7 years IFRS compliant reduction of net assets in US dollars shareholders' equity less exposed to exchange-rate variations. creates better balance with cash generated in US dollars

36 Gross Debt by Currency December 31, Gross debt pro forma after bond issue, currency swap and early redemption of 2018 OCEANE US$ 7% Before other 6% 87% After other 5% 53% US$ 42% 42% of Groupe revenues generated in US dollars

37 36 Improved Liquidity Picture Total amount at 31 Dec Drawn Available Committed facilities 364-day revolving credit facilities year revolving credit facility 1, ,000 Other committed credit facilities Total committed facilities 1, ,201 Uncommitted facilities Total credit facilities 1, ,476 Cash and marketable securities 1,195 Total liquidity available 2,671

38 Strong Reduction in Average Net Debt in Debt reduction continues: Average Net Debt ( m) ,620 1,

39 * Operating income before intangibles / Net interest expense 38 Financial Targets Our targets have been achieved: Targets Net debt/equity <0.5 Net debt/ebitda 1.7x 0.8x <1.5x Interest cover* 9.2x 15.1x >12x Commitment to obtaining investment-grade rating reconfirmed. Reduction of average net debt will be a priority in

40 39 Key Financing Data for 2004 Gross cash flows up 17% to 549 million Improvement in working capital requirement from 2003 Investment in property & equipment limited to or 2.7% of revenues 299 million 101 million Acquisitions 124 million (essentially purchases of minority interests and earn-out payments)

41 Focus on Cash : a new improvement in working capital 40 1H m (vs m at 1H 2003) 2H m (vs m at 2H 2003) Year + 299m Working capital improved by + 531m over 2 years

42 Acquisitions 124 m net Earn-outs 23% Buy-outs 64% Acquisitions 13% Major acquisitions : Thompson Murray, Shopper marketing, US, Dixit, Events, France, CLT, Events, US. Major earn-outs : Triangle (UK) Major buy-outs : Nazca Saatchi & Saatchi, Fallon UK and Media Estrategia

43 42 Free Cash Flow ( million) Gross cash flows Restructuring costs (non-p&l) (79) (141) Capital expenditures, net (101) (96) before acquisitions Free Cash Flow before change in WC Change in Working Capital Free Cash Flow before acquisitions and dividends

44 43 Dividend Trend ( ) % % % % %

45 Switch to IFRS 44

46 45 IFRS Finalization of 2004 financial statements has confirmed the main effects presented at the analysts' meeting of December 9, No significant change is to be expected The opening IFRS balance sheet at January 1, 2004 will be published only after a full audit. The first financial statements under IFRS will be published on presentation of data to June 30, 2005.

47 : Readying for a new phase of profitable growth 46

48 : Readying for a New Phase of Profitable Growth 47 Preparing for Growth Building potential to win new accounts Role of New Business: ensure steady growth combat attrition offset accounts lost Plus expand our portfolio of local and global clients. Resources creative talent: no. 2 worldwide holistic offering: Publicis a pioneer local and regional presence through hubs powerful presence in media consultancy no. 1 worldwide expertise in healthcare communications innovation: anticipating trends

49 : Readying for a New Phase of Profitable Growth 48 Preparing for Growth New Business New Business since 2002 (expected billings, $ bn) Change in client portfolio since 2002 Top 10 Clients in Jan General Mills, Hewlett-Packard, Johnson & Johnson, L Oréal, Nestlé, P&G, Renault, Siemens, Toyota, Verizon Top 12 Clients in Dec General Mills, General Motors, Hewlett-Packard, Kellogg/Keebler, L Oréal, McDonald s, Nestlé, Philip Morris, P&G, Renault, Sanofi-Aventis, Toyota

50 : Readying for a New Phase of Profitable Growth 49 Managing Growth Measured acquisitions: Acquisitions within our financial capacity Definition of strategic priorities: Optimize holistic offering through better balance with SAMS Pursue moves into high-potential markets

51 : Readying for a New Phase of Profitable Growth * Net debt/shareholders equity including minority interests and ORANE 50 Ongoing Improvement in Fundamentals Drives Growth Capacity Consolidate Financial Structure Debt ratio* Control of debt levels - Improved liquidity - Simplified balance sheet Focus on Cash Change in WC: (deterioration) improvement

52 : Readying for a New Phase of Profitable Growth 51 Ongoing Improvement in Fundamentals Drives Growth Capacity Finding New Resources Optimizing Group management Creation and implementation of Shared Resource Centers in our top ten markets from 2003 to Rationalization of real estate Active management of newly vacant space through sub-lets. 80% of program implemented by year-end 2004.

53 Outlook 52

54 * Source: ZenithOptimedia Advertising Expenditure Forecasts December Outlook: Global environment Market Trends in 2005 By Region * Europe: +4.4% North America: +4.0% Asia-Pacific: +5.7% Latin America: +5.2% Rest of World: +11.3% Current Trends Consumer behavior Changes in business Changes in media

55 54 Outlook: Going for Growth Continued Geographical Expansion On High-Growth Markets Focus on China 6th largestmarketworldwide Projected growth: 12% in 2005, 10% in 2006 (Source: ZenithOptimedia) Publicis Groupe in China: 20 agencies, 2,080 staff 2004 revenues: 85 million Resources: no.1 in China, holistic offering Other high-potential markets India, Russia, Brazil, etc. Projected growth from 5 to 12% p.a.

56 55 Outlook: Going for Growth New Business Focus on Sources of New Business Winning new clients with: creative product innovation power & reach quality offering New Business won Jan-Feb New clients won in 2005 JP Morgan Chase (media - worldwide), Schering-Plough (advertising - worldwide), Echostar/ Dish Network (advertising - US). Approx. $900 million Expanding business with existing clients: through holistic offering benefits of combined global/local offering capacity to keep step with clients growth

57 Source: Advertising Age (February 28, 2005) 56 Outlook: Going for Growth New Business 5 amongst the biggest US advertisers are clients of Publicis Groupe.

58 Source: Advertising Age (February 28, 2005) 57 Outlook: Going for Growth New Business

59 Source: Lehman Brothers New Business Scorecard (February 11, 2005) and Advertising Age (February 28, 2005) 58 Outlook: Going for Growth New Business Publicis Groupe, No.1 in New Business January 2005

60 59 Outlook: Going for Growth New Business with Existing Clients Impact of the Holistic Offering Example: Allied Domecq up to 2000: one brand handled 2001 Media account (ZenithOptimedia) brands handled worldwide 2003 Holistic communications for key brands and a large number of local brands Wines Division 2004/2005 Accounts won for remaining local brands

61 60 Outlook: Going for Growth New Business with Existing Clients Impact of the Holistic Offering Example: Fromageries Bel February 2005 Sept.2004 April 2004 January 2004 Two brands handled UK, France, Ger. all brands in W. Europe Adv. + Direct Mktg + shopper mktg + Mid. East China, Japan US, Canada

62 61 Outlook: Going for Growth New Business with Existing Clients Impact of Worldwide Representation Example: UBS 2002 US, UK, Switzerland, Japan and Hong Kong Early 2005 Worldwide brand campaign (90 countries) Worldwide account managed from London and 4 regional hubs Account managed locally in 8 countries: Germany, France, Spain, Italy, Brazil, China, Singapore and Australia

63 Outlook: Going for Growth New Business with Existing Clients Capacity to Keep Step with Clients' Expansion Example: Sanofi-Aventis (holistic service) Targets Targets Targets Design for packaging/ in-store merchandise Promotion/ P.O.S Targets Media Publishing Healthcare Comm. Targets Digital/interactive marketing Advertising Events and incentives Human Resources Comm. CRM and database management Press and public relations Targets Targets Targets Targets Targets Targets 62

64 63 Outlook: Going for Growth New Business with Existing Clients Capacity to Keep Step with Clients' Expansion Example: Sanofi-Aventis (geographical reach) 68 Countries covered Q April-May June-Sept. Q4 2004

65 64 Outlook: Going for Growth New Business with Existing Clients Capacity to Keep Step with Clients' Expansion Example: Sanofi-Aventis (scope of brands) In 2005, Sanofi-Aventis aligned Publicis Groupe with all ex-aventis brands in 100 countries, with the exceptions of Lantus and Lovenox. The extended brand portfolio: most Aventis blockbusters Taxotere, Allegra, Tritace and Ketek, all local and regional brands (OTC, semi-ethical, ethical), specialized divisions (Dermik, etc.), media buying for all brands including corporate communications.

66 65 Outlook: Going for Growth Generating Resources Needed for Acquisitions Policy of Targeted Acquisitions on a Significant Scale New capacity to finance acquisitions while keeping healthy financial ratios Clearly defined targets: SAMS: CRM, public relations, direct marketing, events Countries: high-growth markets (Asia-Pacific, Latin America, Russia, etc.) Consolidation of existing segment and market positions

67 66 Outlook: Enhancing Profitability Keeping a Tight Rein on Costs Scope for new productivity gains between now and 2008 allows for total annual savings of around 80 million Bringing margins up to average Europe Asia-Pacific Healthcare Communications SAMS New initiatives Publicis Groupe Media Optimization of networks Production Procurement Benefits of synergies in the process of realization Shared Resource Centers (10 major countries) 54% 37% 9%

68 67 4-year Targets (presented on 9 December 2004) Revenues by region Today 2008 Latin America 4.1% Asia Pacific 9.9% Europe 41.3% Rest of world 2.0% North America 42.7% Organic growth Selective acquisitions Rest of world 20% Europe 38% North America 42% Revenues by business Media 23 % SAMS 22 % Advertising 55 % Organic growth Holistic Approach Selective acquisitions SAMS 28% Media 28% Advertising 44% Operating margin + synergies 15.4 % 17 %

69 Appendix 68

70 EPS Calculation: Fully Diluted Shares Calculation 69 Number of shares at year beginning ,378, ,081,000 Treasury shares (yearly average) Options exercised SOMAREL/MLMS transaction Number of shares (basic) Adjustments: -ORANE -Stock-options OCEANE OCEANE Number of fully diluted shares (B) (13,014,000) 47, ,411,000 28,125, ,000 17,625,000 23,172, ,608,000 (12,901,000) 40,000 (425,000) 182,795,000 28,125, ,000 17,625,000 10,602, ,541,000

71 70 EPS Calculation ( million) Net income Interest add-back: - Interest on 2018 OCEANE - Interest on 2008 OCEANE - Interest on ORANE - Issuance fees -Taximpact Fully diluted EPS (A) Fully diluted EPS (A/B):

72 71 Net Debt at 31 December 2004 ( million) Net Debt : 563 m (vs. 1, 166 m at 31 December 2003) Gross debt : 1, 960 IPG exch.bonds OCEANE 690 OCEANE redemption 239 premium 2008 OCEANE 672 Short term debt 213 Finance lease 139 Cash & marketable securities: 1, 397 OCEANE redemption 202 premium Cash/ marketable 1, 195 securities

73 Gross Debt by Maturity at 31 December A well balanced maturity profile: 672 1,068 < 1 year 11% > 5 years 55% 220 < 1 year 1 to 5 years > 5 years 1 to 5 years 34%

74 Earn-outs / Buy-outs ( million) Detail of Earn-outs payments (1) : thereafter Total Detail of Buy-outs payments (2) : thereafter Total (1) Recorded in the Balance Sheet as other debt under French Gaap 73

75 74 Bcom3 Provisions ( million) Restruc- Real Other prov. turing Estate & write-offs Total At acquisition date release : - cash (14) (2) - (16) - non-cash - - (16) (16) Increase release : - cash (107) (34) - (141) - non-cash - (6) (41) (47) Exchange effects (23) (38) - (61) Duscount effects - (30) - (30) At 31 Dec release : - cash (46) (32) (1) (79) - non-cash - (6) (10) (16) Cancellations (1) - - (1) Exchange effects (8) (19) (16) (43) Discount effects At 31 Dec