IPSOS SA French Public Limited Company with a share capital of 11 109 058,75 Registered office : 35, rue du Val de Marne 75013 Paris 304 555 634 RCS Paris *** HALF YEAR FINANCIAL REPORT Half-year ended June 30, 2017 (Article L 451-1-2 III of the Monetary and Financial Code and Article 222-4 and subsequent of the General Regulations of the AMF)
Page 2/33 I. First-half 2017 management report Ipsos' revenue for first-half 2017 was 833.8 million, almost equivalent to that published for first-half 2016 ( 833.6 million). Slightly positive currency effects (+0.5%) and negative scope effects (-0.6%) broadly cancelled one another out. Ipsos recorded organic growth of +0.1% for the period in question. All of these data illustrate the perception of stable activity, with no clear trend. This being so, significant changes are under way and can be analysed from four different angles. 1. The "New Services" component, comprising new business rolled out by Ipsos in 2014 that reflects the innovative approaches used to measure better and faster and thereby to help its clients gain a better understanding of markets, continue to progress at a fast pace. With organic growth of 18%, they account for more than 12% of revenue, compared to 7% in 2014. In comparison, the more traditional approaches are seeing the results of efforts to increase productivity, linked, among others, to the continued transition to greater digitisation of data collection systems and also further simplification of research protocols. 2. Certain emerging markets, notably in Asia-Pacific and Eastern Europe, are driving growth, in contrast to more difficult areas such as the Middle East or Brazil. Likewise, within the developed markets, certain countries, such as the United Kingdom, maintained a high growth rate while other countries, such as France, were affected by specific events. The business in Paris hasn t being good in the first-half of the year: very long electoral processes and related uncertainties made market research on products, brands or commercial communications more difficult in the same period. Overall, the gap in growth between developed countries and emerging countries became significant again (5%). Turnover declined by 1.3% in developed countries and grew by 3.3% in emerging countries. 3. Certain markets have been particularly affected by the lag between sales volumes recorded at a given moment and the rate of progress in carrying out the programmes that allow these sales to be recorded in revenue recognised. The transformation in the mix of services sold by Ipsos, already observed at the end of the first quarter, and reflected in the increased weight of bigger programmes with longer execution times rather than shorter and more ad-hoc interventions, has its advantages, in particular in facilitating the optimisation of the teams' work. A negative consequence is that it delays the alignment of revenue with the level of sales. At the end of June, Ipsos' order book overall remained positive, not very far from the annual objective of 3%, at constant scope and exchange rates. The difference with the published revenue growth (+0.1%) is significant and similar to the one recorded at the end of the first quarter. We anticipate a significant increase in Ipsos' revenue for the second half of the year, especially where the difference is significant, for example, in North America and in activities linked to media measurement and advertising communication. 4. Our clients' circumstances are also changing. Companies involved in the CPG sector were, until recently, the biggest, most global and, in certain respects, the most innovative users of market research companies' services. Their ability to grow and at the same time improve their financial performance is now being called into question. They have been affected by strong competition from local or more specific players and have of course had to mobilise resources for their own digitisation processes. Under such conditions, their real concern is to improve while reducing costs. On the one hand, CPG companies, particularly the largest ones, are excellent candidates for systematic use of the new research approaches developed by Ipsos and others. At the same time, the resources that they are allocating to marketing expenditures have decreased, sometimes significantly. In total, in the first half of 2017, Ipsos' activity with these clients decreased by 5%, while it increased significantly for clients from other sectors such as pharmaceutical companies or financial institutions.
Page 3/33 Performance by region and business line Consolidated revenues by geographical area (in millions of euros) 1 st half 2017 1 st half 2016 Change 2017/2016 Organic growth Europe, Middle East and Africa 360.4 360.0 0.1% 3% Americas 318.5 330.4-3.6% -5% Asia-Pacific 154.9 143.1 8.2% 6% First-half Revenues 833.8 833.6 0.0% 0.1% Consolidated revenues by business line (in millions of euros) 1 st half 2017 1 st half 2016 Change 2017/2016 Organic growth Media and Advertising Research 177.7 182.7-2.8% -3% Marketing Research 444.0 447.8-0.9% -0.5% Opinion & Social Research 92.5 85.8 7.8% 9% Client and employee relationship management 119.7 117.2 2.1% 1% First-half Revenues 833.8 833.6 0.0% 0.1% Financial performance Summarized income statement In millions of euros 1 st half 2017 1 st half 2016 Change 1 st half 2017 / 1 st half 2016 Revenue 833.8 833.6 0.0% Gross profit 544.2 545.0-0.1% Gross margin 65.3% 65.4% - Operating profit 50.7 53.8-5.7% Operating margin 6.1% 6.5% - Total of exceptional, non-recurring items (7.9) 8.7 - Finance charge (9.7) (10.2) -5.2% Tax (7.9) (12.4) -36.3% Adjusted net profit* (attributable to the Group) 36.0 33.0 9.0% *Adjusted net profit is calculated before non-cash items linked to IFRS 2 (share-based payments), amortisation of acquisition-related intangible assets (client relationships), deferred tax liabilities related to goodwill on which amortisation is tax-deductible in certain countries and the impact net of tax of other non-recurring income and expenses.
Page 4/33 Gross profit (calculated by deducting from revenue the variable and external direct costs related to contract execution) amounted to 65.3% compared with 65.4% in the first-half of 2016 (and 65.1% for full year 2016). Its change is related to the weight of major contracts, which is higher in this half and for which gross profit is often lower (which does not say anything about the operating margin on these contracts). The continuation of digitisation of data collection and growth in New Services generates higher gross profit otherwise. Concerning operating costs, payroll expenses are up 0.6%, with Group headcount rising 1.5%, mainly in emerging countries, to give a permanent headcount of 16,845 at 30 June 2017. The cost of variable share-based payments was stable at 5.1 million. Overhead costs are under control and fell 1.9%, notably due to savings in rental costs. Overall operating costs, recorded additional expenses related to the New Way programme, for which Ipsos forecast 5 million in additional investment in 2017: 2.3 million was spent in the first-half of 2017. Other operating income and expenses consist mainly of the impact of exchange rate transactions on operating account items, which were a negative 2 million over the half-year period, whereas they were a positive 1.3 million in the first half of 2016. Group operating margin amounted to 50.7 million, or 6.1% of revenue, a drop of 40 basis points compared to the same period in the previous year, due to stable revenue volume and the investment in the New Way programme. To be noted: due to the seasonality of the market research activity, the operating margin of the first-half is not an indicator of the one of the full year. Below the operating margin, the amortisation of intangibles identified on acquisitions concerns the portion of goodwill allocated to client relationships during the 12-month period following an acquisition, recognised in the income statement over several years, in accordance with IFRS. This allocation amounted to 2.4 million compared with 2.5 million the previous year. The balance of other non-operating, non-recurring income and expense was - 7.9 million, compared with net income of 8.7 million in the previous year. It comprises unusual items not related to operations, and includes acquisition costs as well as the costs of the current restructuring plans. It included in particular, in the first half of 2016, a net gain of 15.4 million in relation to the repayment received from Aegis in February 2016 bringing an end to all claims and legal proceedings regarding the dispute arising from the acquisition of Synovate in 2011. In addition, a total of 6.7 million in restructuring and streamlining expenses was recognised, some of which are related to the New Way programme. Finance costs. The net cost of interest amounted to 9.7 million, compared with 10.2 million, down 5.2%, due to a fall in its credit conditions. Taxes. The effective tax rate on the IFRS income statement was 26.8%, compared with 25.6% for the previous year. As in the past, it includes a deferred tax liability of 1.3 million (compared with a deferred tax liability of 2.1 million in the first half of 2016), cancelling out the tax saving achieved through the tax deductibility of goodwill amortisation in certain countries, even though this deferred tax charge would fall due only if the activities concerned were sold, and which is restated accordingly in adjusted net profit. The Net profit (attributable to the Group), stands at 21.6 million versus 35.2 million in first half 2016, the change being mainly related to the exceptional profit of 15.4 million recorded under "other nonoperating and non-recurring income and expenses". Adjusted net profit attributable to the Group, which is the relevant and constant indicator used to measure performance, came to 36.0 million, up 9.0% compared with the first half of 2016.
Page 5/33 Financial structure Free cash flow. Operating cash flow stands at 56.6 million in line with changes in income from operating activities. - The working capital requirement improved by 7.4 million. - Current investments in property, plant and equipment and intangible assets, consisting mainly of IT investments, were stable at 7.7 million. Concerning non-current investments, Ipsos invested 5.4 million over the half year in acquisitions, proceeding in particular with the buyback of non-controlling interests in a US company and in certain emerging countries (notably Central America). In addition, Ipsos received 3.8 million from funds raised from its IPF 2020 stock option plan. The potential dilution of the 156,344 shares subscribed was offset by the cancellation of the same number of its own shares from among those bought back in November 2016. As a reminder, Ipsos invested in its share buyback programme in 2016, including 65 million in November 2016 for the purchase of Ipsos shares from LT Participations, its holding company, prior to the merger between Ipsos and LT Participations on 29 December 2016. At 30 June 2017, Ipsos holds 1,580,596 of own shares (3.6% of its share capital) allocated to the involvement plans of its employees. Shareholders equity totalled 892 million as at 30 June 2017, compared with 939 million published as at 31 December 2016, after deduction of the 36.4 million in dividends paid on 5 July 2017. Net financial debt totalled 494 million at 30 June 2017, compared with 544 million at 31 December 2016, thanks to the strong operating cash flows mentioned above. The net gearing was 55.4%, compared with 58.0% at 31 December 2016. Liquidity position. Net cash at the end of the half-year period was 123 million, compared with 127 million at 31 December 2016, giving Ipsos a good liquidity position. Ipsos also has over 300 million available through credit facilities. OUTLOOK FOR 2017 Ipsos operates in a growing market: the demand for information and analysis from companies and public institutions for better measurement and understanding of Society, markets and ultimately people, remains strong. It is also undergoing transformation as today, the combined use of new progress in human sciences, data sciences, technologies and know-how make it possible to better exploit information. It is by using the power of these sciences and technologies, but also the skills of its teams, that Ipsos is entering a new phase full of confidence: one where it can legitimately support its clients to achieve fair, clear, accessible and full understanding of their own markets. Thanks to the New Way programme, which will be completed, as planned, at the end of this year, Ipsos has demonstrated that, with the aid of innovation and, in this case, the implementation of New Services, a large, established company can hold its position and retain the confidence of its clients. The "Total Understanding" programme, whose principle and existence were made public a few months ago, will now take over. It will build on the lessons learnt from New Way. It is also more ambitious. Its aim is for Ipsos to eventually be able to offer its clients all the resources required to better understand the behaviour, reactions and aspirations of their environment, the market where they operate and the people they target. This approach will enable a company to build winning competitive positions and also ensure that the resources that they have decided to allocate, are effective. It is by having the ability to deploy a sufficient diversity of investigation, analysis and reporting solutions that Ipsos will confirm its position not only as a supplier of reliable and relevant information, but also as a
Page 6/33 partner in the management of information which is essential to the success of the most innovative ideas and to the implementation of the most ambitious plans. The precise details of the "Total Understanding" plan will be communicated when Ipsos presents its annual results in February 2018. In the meantime, Ipsos' teams will continue to work on completing financial year 2017 successfully. To achieve the 3% target for organic growth in 2017 as published at the start of the year, the international CPG companies, which are among Ipsos' longest-standing and largest clients, need to regain their average historical levels of activity in the second-half 2017. Another scenario would be that the activity of these same companies (along with Ipsos) declines further and Ipsos' growth would fall to between 1% and 2%. The first scenario (the most optimistic) is not very likely, since it assumes that these companies have already subscribed to the new approach, to these new more fragmented and volatile markets, and that Ipsos has also had the time to adapt its services to their new requirements. The second scenario (the most pessimistic) is also unlikely, in that it assumes an additional decline in sales in the second half of the year plus the persistence of certain lags between the sales level and the level of revenue actually recognised. Furthermore, the 2016/2017 comparison base will be more favourable in the second half of the year, particularly towards the end of the year. This being so, regardless of the scenario, whether growth is below 2% or above 2%, operating margin will be slightly up in comparison with 2016, as announced.
Page 7/33 II. Half-year 2017 consolidated financial statements 1. Consolidated income statement Half-year ended 30 June 2017 In thousand euros Notes 30/06/2017 30/06/2016 31/12/2016 Revenue 3 833,794 833,599 1,782,691 Direct costs 4.1 (289,583) (288,589) (622,244) Gross profit 544,211 545,010 1,160,446 Staff costs (excluding share-based payments) (374,309) (372,135) (751,754) Staff costs (share-based payments) 5.5.3 (5,104) (5,039) (9,991) General operating expenses (111,727) (113,873) (220,646) Other operating income and expenses 4.2 (2,355) (180) 2,026 Operating margin 3 50 716 53,784 180,080 Amortisation of intangible assets identified on acquisitions (2,405) (2,451) (4,786) Other non-operating income and expense 4.3 (7,973) 8,742 143 Income from associates 69 (48) (46) Operating profit 40,407 60,026 175,391 Financing costs 4.4 (9,682) (10,217) (20,811) Other financial income and expenses 4.4 (1,134) (1,188) (475) Profit before tax 29,591 48,621 154,105 Income tax - excluding deferred tax on goodwill 4.5 (6,622) (10,286) (37,765) Income tax - deferred tax on goodwill (1,308) (2,162) (6,582) Income tax 4.5 (7,930) (12,447) (44,347) Net profit 21,660 36,174 109,758 Of which attributable to equity holders of the Parent Company 21,558 35,179 106,897 Of which minority interests 103 995 2,861 Basic earnings per share in euros 4.6 0.50 0.78 2.40 Diluted earnings per share in euros 4.6 0.50 0.77 2.36
Page 8/33 2. Statement of Comprehensive Income Half-year ended 30 June 2017 In thousand euros 30/06/2017 30/06/2016 31/12/2016 Net profit 21,660 36,174 109,757 Other comprehensive income Hedges of net investments in a foreign subsidiary (282) (19,008) (32,626) Currency translation differences (38,147) 2,905 24,483 Other variations Deferred tax (745) 6,600 10,822 Other reclassified comprehensive income (39,173) (9,503) 2,680 Actuarial gains and losses on defined benefit plans (2,487) Variation of deferred tax 470 Other non-reclassified comprehensive income (2,017) Total other comprehensive income (39,173) (9,503) 663 Total comprehensive income (17,513) 26,671 110,421 Of which attributable to equity holders of the Parent Company (16,162) 26,506 108,180 Of which attributable to minority interests (1,351) 166 2,249
Page 9/33 3. Consolidated balance sheet Half-year ended 30 June 2017 In thousand euros Notes 30/06/2017 31/12/2016 ASSETS Goodwill 5.1 1,198,102 1,259,193 Other intangible assets 64,624 71,489 Property, plant and equipment 32,834 35,517 Investments in associates 557 207 Other non-current financial assets 5.2 20,001 22,547 Deferred tax assets 18,724 18,184 Total non-current assets 1,334,842 1,407,138 Trade receivables 5.3 524,548 624,406 Current income tax 26,670 15,204 Other current assets 5.4 87,408 78,677 Derivatives financial instruments 5.6 2,898 3,399 Cash and cash equivalents 5.6 123,082 164,892 Total current assets 764,606 886,579 TOTAL ASSETS 2,099,448 2,293,717 In thousand euros Notes 30/06/2017 31/12/2016 LIABILITIES Share capital 5.5 11,109 11,109 Share premium 516,275 516,489 Own shares (41,547) (55,905) Currency translation differences (82,611) (44,819) Other reserves 472,063 492,737 Shareholders' equity - attributable to the Group 875,289 919,612 Minority interests 17,412 19,805 Total shareholders' equity 892,701 939,417 Borrowings and other long-term financial liabilities 5.6 540,539 626,152 Non-current provisions 5.7 9,150 9,230 Retirement benefit obligations 5.7 28,154 28,029 Deferred tax liabilities 97,122 100,432 Other non-current liabilities 5.8 21,663 21,159 Total non-current liabilities 696,629 785,002 Trade payables 226,417 262,865 Short-term portion of borrowings and other financial liabilities 5.6 79,717 86,662 Current income tax liabilities 4,586 11,104 Current provisions 5.7 8,685 9,664 Other current liabilities 5.8 190,713 199,005 Total current liabilities 510,118 569,300 TOTAL LIABILITIES 2,099,448 2,293,717
Page 10/33 4. Consolidated cash flow statement Half-year ended 30 June 2017 In thousand euros Notes 30/06/2017 30/06/2016 31/12/2016 OPERATING ACTIVITIES NET PROFIT 21,660 36,174 109,758 Adjustments to reconcile net profit to cash flow Amortisation and depreciation of fixed assets 12,796 12,754 25,970 Net profit of equity associated companies - net of dividends received (69) 48 46 Losses/(gains) on asset disposals (118) 203 2,481 Movement in provisions 25 (15,537) (12,702) Share-based payments expense 4 747 4,893 9,737 Other non-cash income/(expense) (109) 14 978 Acquisitions costs of consolidated companies 132 1,184 1,325 Finance costs 9,682 10,217 20,811 Income tax expense 7,930 12,447 44,347 OPERATING CASH FLOW BEFORE WORKING CAPITAL, FINANCING AND TAX PAID 56,676 62,398 202,752 Change in working capital requirement 6.1 7,383 26,191 22,819 Interest paid (9,715) (9,623) (20,351) Income tax paid (24,707) (15,838) (38,046) CASH FLOW FROM OPERATING ACTIVITIES 29 637 63,128 167,174 INVESTMENT ACTIVITIES Acquisitions of property, plant and equipment and intangible assets Proceeds from disposals of property, plant and equipment and intangible assets 6.2 (7,850) (8,136) (17,631) 200 879 133 Acquisitions of financial assets 1,024 (374) (1,070) Acquisitions of consolidated companies and businesses goodwill CASH FLOW FROM INVESTMENT ACTIVITIES FINANCING ACTIVITIES 0 22,425 23,900 (6 627) 14,794 5,332 Increase/(Decrease) in capital 0 0 (225) (Purchase)/Proceeds of own shares 3,790 (6,163) (85,050) Increase/(Decrease) in long-term borrowings (57,170) (63,561) (1,688) Increase/(Decrease) in bank overdrafts and short-term debt (338) 1,672 491 Buy out minority interests (5,441) (32,283) (33,312) Dividends paid to Parent-Company shareholders 0 0 (36,358) Dividends paid to minority shareholders of consolidated companies 0 (465) (431) CASH FLOW FROM FINANCING ACTIVITIES (59,159) (100,801) (156,575) NET CASH FLOW (36,149) (22,879) 15,932 Impact of foreign exchange rate movements (5,662) (2,010) (2,615) CASH AT BEGINNING OF PERIOD 164,892 151,576 151,576 CASH AT END OF PERIOD 123,082 126,686 164,892
Page 11/33 5. Statement of changes in consolidated shareholders equity In thousand euros Share capital Share Premium Own shares Other reserves Currency translation difference Shareholders' equity - attributable to the Group Shareholders' equity Minority interests January 1st, 2016 11,334 540,201 (1,220) 423,190 (48,110) 925,395 19,889 945,284 - Change in capital - - - - - 0-0 - Dividends paid - - - (36,228) - (36,228) (228) (36,457) - Impact of share buy-out commitments - Delivery of free shares related to 2014 plan - - - (3,658) - (3,658) 715 (2,943) - - 6,660 (6,660) - - - - - Other movements on own shares - - (6,248) 85 - (6,163) - (6,163) - Share-based payments taken directly to equity - - - 4,893-4,893-4,893 - Other movements - - - 289-289 28 317 Transactions with the shareholders- - 0 412 (41,279) - (40,866) 515 (40,352) - Net profit - - - 35,179-35,179 995 36,174 - Other elements of the Comprehensive Income- Hedges of net investments in a foreign subsidiary - - - - - - - - - - - - (19,008) (19,008) - (19,008) Total Deferred tax on hedges of net investments in a foreign subsidiary - - - - 6,600 6,600-6,600 Currency translation differences - - - - 3,734 3,734 (829) 2,905 Other variations - - - - - - - - - Total of Other Comprehensive Income - - - - (8,674) (8,674) (829) (9,503) Comprehensive income - - - 35,179 (8,674) 26,505 166 26,671 June 30 th, 2016 Comprehensive income 11,334 540,201 (808) 417,091 (56,785) 911,034 20,569 931,603 January 1st, 2017 11,109 516,489 (55,905) 492,738 (44,819) 919,612 19,805 939,417 - Change in capital - - - - - - - - Dividends paid - - - (35,993) - (35,993) (20) (36,013) - Impact of share buy-out commitments - - - (264) - (264) (984) (1,248) - Delivery of free shares related to 2015 plan - - 10,427 (10,427) - - - - - Other movements on own shares - (214) 3,931 65-3,782-3,782 - Share-based payments taken directly to equity - - - 4,747-4,747-4,747 - Other movements - - - (434) - (434) (38) (468) Transactions with the shareholders- - (214) 14,358 (42,306) - (28,162) (1,042) (29,200) - Net profit - - - 21,631-21,631 30 21,660 - Other elements of the Comprehensive Income- - - - - - - - - Hedges of net investments in a foreign subsidiary - - - - (598) (598) 316 (282) Deferred tax on hedges of net investments in a foreign subsidiary - - - - (745) (745) - (745) Currency translation differences - - - - (36,450) (36,450) (1,697) (38,147) Other variations - - - - - - - - - Total of Other Comprehensive Income - - - - (37,793) (37,793) (1,381) (39,173) Comprehensive income - - - 21,631 (37,793) (16,162) (1,351) (17,513)
Page 12/33 June 30 th, 2017 Comprehensive income 11,109 516,275 (41,547) 472,063 (82,611) 875,289 17,412 892,701 Notes to the consolidated financial statements Half-year ended 30 June 2017 1. Information about the company and significant accounting policies 1.1. Information about the Company Ipsos is a global company which offers surveys solutions for companies and institutions. It is currently the world's third-largest player with consolidated subsidiaries in 88 countries. Ipsos SA is a Société Anonyme (limited liability corporation) listed on Euronext Paris. Its head office is at 35 rue du Val de Marne, 75013 Paris, France. On 26 July 2017, Ipsos Board of Directors approved and authorized publication of the half-year financial condensed interim consolidated statements as at 30 June 2017. 1.2. Significant accounting policies 1.2.1 Basis of preparation Ipsos condensed interim consolidated financial statements for half-year 2017 have been drawn up in line with IAS 34 Interim Financial Reporting. These condensed interim consolidated financial statements as of June 30 th, 2017 do not include the entirety of the disclosure requested for the annual consolidated financial statements. These condensed interim consolidated financial statements as of June 30 th, 2017 should be read and understood in conjunction with the consolidated financial statements published as of December 31 st, 2016. The accounting principles applied to prepare the condensed interim consolidated financial statements for the halfyear ended 30 June 2017, are identical to those used to prepare the consolidated financial statements for 2017 except for amendments of standards and interpretations which are obligatory applicable as from January 1 st, 2017. These accounting principles are described in the note 1 of the consolidated financial statements for 2016 and were prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union. Standards, amendments and interpretations adopted by the European Union and effective for reporting periods beginning on or after January 1 st, 2017 Amendments to IAS 7 "Statement of Cash Flows" concerning changes in net debt; Amendment to IFRS 12 "Disclosure of interests in other entities" classified as assets held for sale; IFRS 15: In late May 2014, the IASB issued IFRS 15 "Revenue from contracts with customers". This standard was developed as part of a joint project between the IFRS and US benchmarks. From 1 January 2018, IFRS 15 will replace IAS 18 "Revenue" and IAS 11 "Construction contracts". In April 2016, the IASB issued clarifications (amendments to IFRS 15) concerning the identification of performance bonds, agent and principal concepts and the accounting of licence revenues. The adoption of these clarifications by the European Union is underway. IFRS 15 includes new product recognition principles, such as the identification of performance bonds or the allocation of the transaction price for multiple-unit contracts and modifies the analysis to be carried out on the revenue generated by licensing agreements or the taking into account of variable revenues. It also includes new requirements for information in notes to statements. The Group intends to apply IFRS 15 from 1 January 2018. Ipsos has begun its implementation of IFRS 15 with a diagnostic phase during which the various categories of customer agreements, which are representative of Ipsos's business, will be analysed in the main countries. Analyses are underway with the help of a consulting agency. The Group will have its first conclusions internally by the end of September. At the same time, Ipsos is part of work and reflection group with five marketing research companies which are the members of our Esomar professional union to determine the recommendations and best practices.
Page 13/33 1.2.2 Use of estimates When drawing up the consolidated financial statements, the measurement of certain balance sheet or income statement items requires the use of assumptions, estimates and assessments. These assumptions, estimates and assessments are based on information or situations existing on the date on which the financial statements were drawn up and which may in future prove to be different from the actual situation. The assumptions, estimates and assessments used during the half-year closing remain unchanged than the last year ended closing excluding: - the pension liabilities (which are estimated according to a forecast based on the latest available actuarial valuation); - the income taxes for the Group have been calculated according to the effective income tax rate forecasted for the whole year 2017 (see note 4.5); - the goodwill for which the recoverable amount is tested for impairment annually and only when there is an indication that they may be impaired (see note 5.1.1). - changes in commitments to buy out minority interests and earn-out payments 2. Changes in the scope of consolidation Changes in the scope of consolidation during the first semester 2017 are shown in the following table : Name Type Change in % of voting rights Change in % stake Date of inclusion or exclusion from scope of consolidation Country Ipsos MMA Inc Ipsos Stat Jordan (Ltd) Shanghai Ipsos Information Technology Company Limited Buy-out of minority interests Buy-out of minority interests +2.6% +2.6% 2nd quarter 2017 USA +25% +13.35% 2nd quarter 2017 Jordan Creation +40% +40% 2nd quater 2017 China
Page 14/33 3. Segment reporting The segment reporting presentation is based on internal reporting regularly reviewed by the Management to evaluate the segments performance and to allocate them resources. The Executive Committee is the main operational decision-maker according to IFRS8. The holdings as well as the intra-segments eliminations are included into these three segments, which are reported into the section Other. Furthermore, Ipsos has a single business activity : i.e. survey-based research. Segment assets are made of tangibles and intangibles assets (including goodwill), trade receivables and other receivables. 3.1 Segment reporting as at 30 June 2017 In thousands of euros Europe, Middle East, Africa Americas Asia Pacific Rest of the World Revenue 371,897 328,564 165,535 (32,202) 833,794 Sales to external clients 360,393 318,479 154,913 (0) 833,786 Inter-segment sales 11,503 10,085 10,622 (32,202) 9 Operating margin 7,918 22,505 11,720 8,573 50,716 Depreciation and amortization (7,707) (3,419) (1,667) (4) (12,796) Segment Assets (1) 839,919 844,819 332,382 (109,604) Total 1,907,515 Segment Liabilities 332,770 133,427 92,664 (146,467) 412,396 Capital expenditure for the period 3,432 1,041 1,026 3 5,501 (1) Segment assets consist of property, plant and equipment and intangible assets (including goodwill), trade and other receivables. In thousands of euros 3.2 Segment reporting as at 30 June 2016 Europe, Middle East, Africa Americas Asia Pacific Rest of the World Revenue 371,237 341,751 156,027 (35,416) 833,599 Sales to external clients 359,979 330,431 143,116-833,527 Inter-segment sales 11,257 11,320 12,911 (35,416) 73 Operating margin 22,702 29,053 9,644 (7,397) 54,002 Depreciation and amortization (7,154) (3,814) (1,788) 3 (12,754) Segment Assets (1) 861,164 896,960 336,289 (103,056) 1,991,357 Segment Liabilities 340,625 132,337 88,165 (137,719) 423,409 Capital expenditure for the period 6,597 830 709-8,136 (1) Segment assets consist of property, plant and equipment and intangible assets (including goodwill), trade and other receivables. In thousands of euros 3.3 Segment reporting as at 31 December 2016 Europe, Middle East, Africa Total Americas Asia Pacific Rest of the World Total Revenue 785,973 736,958 336,902 (77,142) 1,782,691 Sales to external clients 760,184 711,300 311,113-1,782,597 Inter-segment sales 25,789 25,658 25,789 (77,142) 94 Operating margin 66,069 92,764 26,960 (5,713) 180,080 Depreciation and amortisation (15,074) (7,454) (3,437) (5) (25,970) Segment Assets (1) 881,564 946,173 353,459 (111,914) 2,069,282 Segment Liabilities 358,100 169,576 103,475 (185,377) 445,775 Capital expenditure for the period 13,148 2,205 2,278 1 17,631 (1) Segment assets consist of property, plant and equipment and intangible assets (including goodwill), trade and other receivables.
Page 15/33 3.4 Reconciliation of segment assets with total Group assets In thousand euros 30/06/2017 30/06/2016 31/12/2016 Segment assets 1,907,515 1,991,357 2,069,282 Financial assets 20,558 17,144 22,754 Tax assets 45,394 35,326 33,389 Financial instruments assets 2,898 6,804 3,399 Cash and cash equivalents 123,082 126,686 164,892 Total Group assets 2,099,448 2,177,318 2,293,717 4 Notes to the income statement 4.1 Direct costs In thousand euros 30/06/2017 30/06/2016 31/12/2016 Interviewer payroll costs (45,120) (47,741) (96,957) Other direct costs (244,463) (240,848) (525,288) Total (289,583) (288,589) (622,244) 4.2 Other operating income and expenses This figure mainly consists of non-recurring items related to currency effects related to commercial transactions. 4.3 Other non-operating income and expenses In thousand euros 30/06/2017 30/06/2016 31/12/2016 Net impact of Aegis refund - 15,390 16,491 Acquisition costs (132) (50) (65) Provision for social dispute in Brazil (2,638) (1,001) (2,346) Costs of restructuring and rationalization (6,761) (6,123) (12,570) Agrifood disposal - - (1,473) Variation of commitments of buy-out of minority interests 1,558 527 106 Total (7,973) 8,743 143
Page 16/33 4.4 Financial income and expenses In thousand euros 30/06/2017 30/06/2016 31/12/2016 Interest expenses on borrowings and bank overdrafts (11,064) (11,084) (23,669) Change in the fair value of derivatives 169 (291) 363 Interest income from cash and cash equivalents 1,213 1,159 2,495 Finance costs (9,682) (10,217) (20,811) Foreign exchange gains and losses (924) (493) 1,725 Other financial items (210) (695) (2,200) Other financial income and expenses (1,134) (1,188) (475) Total financial result (10,816) (10,935) (21,286) 4.5 Current income tax Income taxes for the half-year 2017 have been calculated according to the effective income tax rate forecasted for the whole year 2017 in the Ipsos group. Based on these projections, the effective income tax rate amounts to 26.8 % as described below: In thousands of euros 30/06/2017 30/06/2016 31/12/2016 Profit before tax 29,591 48,621 154,105 Less the share of profit of associates (69) 48 46 Profit before tax of consolidated companies 29,522 48,669 154,151 Income tax (7,930) (12,447) (44,357) Effective tax rate 26.8% 25.6% 28.8 % 4.6 Earnings per share 4.6.1 Earnings per share Weighted average number shares 30/06/2017 31/12/2016 Figure at previous year end 44,625,512 45,336,235 Capital increase (156,344) (150,000) Exercise of options 156,344 0 Own shares (1,868,123) (560,723) Number of shares used to calculate basic earnings per share 42,757,389 44,626,512 Number of additional shares potentially resulting from dilutive instruments 652,759 676,414 Number of shares used to calculate diluted earnings per share 43,410,148 45,301,926 Net Profit attributable to equity holders of the Parent (in thousand euros) 21,558 106,897 Basic earnings per share (in euros) 0.50 2.40 Diluted earnings per share (in euros) 0.50 2.36
Page 17/33 4.6.2 Adjusted earnings per share Adjusted net profit - group share Adjusted net profit attributable to equity holders of the Parent Items excluded: 30/06/2017 30/06/2016 31/12/2016 21,558 35,179 106,897 - Staff costs (share-based payments) 5,104 5,039 9,991 - Amortization of intangibles identified on acquisitions 2,405 2,451 4,786 - Other non-recurring income and expense 7,973 (8,742) (143) - Deferred tax on goodwill amortization 265 527 511 - Non monetary impact on variation of puts 1,308 2,162 6,582 - Income tax on excluded items (2,336) (3,351) (6,540) - Minority interests on excluded items (246) (218) (427) Adjusted net profit 36,031 33,047 121,657 Average number of shares 42,757,389 45,187,684 44,625,512 Average diluted number of shares 43,410,148 45,595,340 45,301,926 Basic adjusted earnings per share (in euros) 0.84 0.73 2.73 Diluted adjusted earnings per share (in euros) 0.83 0.72 2.69
Page 18/33 4.7 Adjusted net profit In thousands of euros 30/06/2017 30/06/2016 31/12/2016 Revenue 833,794 833,599 1,782,691 Direct costs (289,583) (288,589) (622,244) Gross profit 544,211 545,010 1,160,446 Payroll - excluding share based payments (374,309) (372,135) (751,754) Payroll - share based payments (*) (5,104) (5,039) (9,991) General operating expenses (111,727) (113,873) (220,646) Other operating income and expense (2,355) (180) 2,026 Operating margin 50,716 53,784 180,080 Amortisation of intangibles identified on acquisitions (*) (2,405) (2,451) (4,786) Other non-operating income and expense (*) (7,973) 8,742 143 Income from associates 69 (48) (46) Operating profit 40,407 60,026 175,391 Finance costs (9,682) (10,217) (20,811) Other financial income and expense (*) (1,134) (1,188) (475) Profit before tax 29,591 48,621 154,105 Income tax - excluding deferred tax on goodwill (6,622) (10,285) (37,765) Income tax - deferred tax on goodwill (*) (1,308) (2,162) (6,582) Income tax (7,930) (12,447) (44,347) Net profit 21,660 36,175 109,758 Attributable to the Group 21,558 35,179 106,897 Attributable to Minority interests 103 995 2,861 Adjusted net profit (*) 36,380 34,260 124,945 Attributable to the Group 36,031 33,047 121,657 Attributable to Minority interests 349 1,213 3,288 Adjusted earnings per share (in euros) - Basic 0.84 0.73 2.73 Adjusted earnings per share (in euros) - Diluted 0.83 0.72 2.69 (*) The adjusted net profit is calculated before non-monetary items linked with IFRS2 (free shares), before amortization of intangibles linked with acquisitions (customer relationships), before deferred tax liabilities concerning goodwill whose amortization is deductible in some countries, before the net tax coming from the other non-recurring income and expense and the non-monetary impact of changes in puts in other financial income and expense 4.8 Dividends paid and proposed Ipsos policy is to pay single dividend in respect of a given accounting period in the July following the end of the period. The amounts per share paid and proposed are as follows: In respect of Net dividend per share (in euro) 2016 (1) 0.85 2015 0.80 2014 0.75 2013 0.70 (¹) Total dividend payment of 36 million (after elimination of dividends linked to treasury shares as at 31 December 2016) to be proposed to the General Meeting of Shareholders on 28 April 2017. The dividend was paid on 5 July 2017.
Page 19/33 5 Notes to the balance sheet 5.1 Goodwill 5.1.1 Goodwill impairment tests At 31 December 2016, on basis of measurements carried out in-house in coherence with accounting principles as reported in notes 1.2.15 of the consolidated 2016 financial statement. Ipsos management concluded that the recoverable value of goodwill allocated to each group of cash-generating units exceeded its carrying amount. As of 30 June 2017, following the sensitivity noted in previous years in the Latina America area, additional follow up work was conducted on the basis of comparable transactions and 2017 s previsions updated and on the long-term vision on the basis of a 8 % operational margin (8.8% in this case in 2021 final year). As of 30 June 2017, the work carried out in the Latina America area as well as in the rest of the group do not conduct to a reconsideration of the 31 December 2016 s conclusions. 5.1.2 Changes as of 30 June 2017 In thousand euros 01/01/2017 Increases Decreases Changes in commitments to buy out minority interests Exchange rates 30/06/2017 Goodwills 1,259,193 - - (2,020) (59,071) 1,198,102 5.2 Other non-current financial assets In thousands of euros 01/01/2017 Increases Decreases Changes in scope of consolidation, reclassifications and 30/06/2017 translation differences Loans 644 5 44 (2) 691 Other financial assets 21,976 1,478 (2,551) (1,519) 19,384 Gross value 22,621 1,482 (2,506) (1,522) 20,075 Impairment of other financial assets (73) - - (73) Impairment (73) - - (73) Net value 22,547 1,482 (2,506) (1,522) 20,001 5.3 Trade receivables In thousand euros 30/06/2017 30/06/2016 31/12/2016 Gross value 531,288 559,832 631,474 Impairment (6,741) (7,078) (7,068) Net value 524,548 552,754 624,406 5.4 Other current assets In thousand euros 30/06/2017 30/06/2016 31/12/2016 Advances and payments on account 3,705 5,536 2,119 Social security receivables 4,920 5,373 4,143 Tax receivables 44,314 41,873 36,512 Prepaid expenses 20,987 20,669 20,888 Other receivables and other current assets 13,484 14,836 15,015 Total 87,408 88,286 78,677
Page 20/33 All other current assets have a maturity of less than one year. 5.5 Equity 5.5.1 Share capital As of 30 June 2017, the share capital of Ipsos SA was 11,109,058.75 euros including 44,436,235 shares with a par value of 0.25 each. The number of shares making up the share capital and the number of own shares changed as follows during the first semester 2017 : Number of shares (par value 0.25) Shares issued Own shares Shares in issue At 31 December 2016 44,436,235 (2,092,179) 42,344,056 Increase of capital (exercise of option) 156,344 156,344 Decrease of capital (exercise of option) (156,344) 156,344 Transfer (delivery of free share allocation program of April 2015) 358,554 358,554 Purchase (except liquidity contract) Changes under the liquidity contract (3,315) (3,315) At 30 June 2017 44,436,235 (1,580,596) 42,855,639 5.5.2 Share-based plans 5.5.2.1 Share subscription option plans The Group decided to set up stock option plans for all its senior management. The current terms of plans outstanding at 30 June 2017 are as follows: Grant Date Vesting Date Expiry date Exercis e price Number of grantees Number of options granted by the Board of Directors Number of options outstanding 01/01/2017 Number of options granted during the year Number of options cancelled during the year Number of options exercised during the year Number of options expired during the year Number of options outstanding 30/06/2016 04/09/2012 04/09/2015 129 1,545,380 938,824 - (21,844) (91,368) - 825,612 04/09/2020 24.63 04/09/2012 04/09/2016 27 423,990 324,898 - (16,892) (64,976) - 243,030 Sub-total 2012-2020 Plan 156 1,969,370 1,263,722 - (38,736) (156,344) - 1,068,642
Page 21/33 5.5.2.2 Free shares attribution plans Each year since 2006, the Board of Directors set up free share attribution plans for the benefit of French residents and French non residents, who are employees, officers and directors of the Ipsos Group. These shares will vest with the beneficiaries only after a period of two years, provided that the beneficiary is still an employee, officer or director of the Ipsos Group at the end of this period. At the end of the vesting period, the free shares will remain unavailable for French residents for a further two-year period. The free share attribution plans which remain outstanding at 30 June 2017 were set up with the following characteristics: Grant date Type of plan Number of grantees Number of free shares initially attributed Expiry date of the vesting period Number of free shares outstanding 01/01/2017 Number of free shares granted during the year Number of free shares cancelled during the year Number of free shares reclassified during the year Number of free shares vested during the year Number of free shares outstandin g 30/06/201 7 04/09/2012 IPF Rest of the World 129 154,538 04/09/2017 101,643 (2,761) 98,882 04/09/2012 IPF France 27 42,399 04/09/2017 33,527 (5,998) 27,529 Sub-Total Plan 156 196,937 135,170 (8,759) 126,411 IPF 2012-2020 24/04/2015 France 87 68,918 24/04/2017 59,441 (3,213) (56,228) 24/04/2015 Rest of the World 894 344,261 24/04/2017 309,165 (6,839) (302,326) Sub-Total 2015 981 413,179 368,606 (10,052) (358,554) Plan 28/04/2016 France 65 64,903 28/04/2018 64,903 (7,613) 57,290 28/04/2016 Rest of the World 720 381,403 28/04/2018 375,272 (6,809) 368,463 Sub-Total 2016 Plan 28/04/2017 Sub-Total 2017 Plan France/ Rest of the World 785 446,306 440,175 (14,422) 425,753 850 397,810 28/04/2019 397,810 (775) 397,035 850 397,810 397,810 (775) 397,035 Total free shares attribution plans 943,951 397,810 (34,008) (358,554) 949,199 5.5.3 Analysis of share-based payment costs The expenses recognized in respect of stock option and free shares plans were calculated as follows: In thousands of euros 30/06/2017 30/06/2016 31/12/2016 IPF 2020 plan of 4 September 2012 222 612 1,152 Free shares attribution plan of 25 April 2014 1,172 1,172 Free shares attribution plan of 24 April 2015 1,312 2,331 4,392 Free shares attribution plan of 28 April 2016 2,370 779 3,020 Free shares attribution plan of 28 April 2017 843 Sub-Total 4,747 4,893 9,737 Employer contribution in 20% France and UK 357 146 254 Total 5,104 5,039 9,991
Page 22/33 5.6 Net debt Analysis of borrowings and other financial liabilities by maturity Borrowings, net of cash and cash equivalents, are as follows: In thousand euros Total less than 1 year 30 June 2017 31 December 2016 Maturity between 1 and 5 years more than 5 years Total less than 1 year Maturity between 1 and 5 years more than 5 years Bond issue 258,098 73,163 159,111 25,824 280,249 79,447 172,768 28,035 Bank borrowings 355,208 91 280,328 74,789 424,741-347,015 77,726 Derivative financial assets 431 431 600 600 - - Debt linked to finance leases 642 278 364 708 236 472 - Other financial liabilities 132 8 123 145 8 136 - Accrued interests on financial liabilities 3,958 3,958-4,239 4,239 - - Bank overdrafts 1,789 1,789 2,133 2,133 - - Borrowings and other financial liabilities (a) 620,257 79,717 439,926 100,613 712,815 86,662 520,391 105,761 Derivatives financial assets (b) 2,898 2,898 - - 3,399 3,399 - - Marketable securities 10,141 10,141 - - 14,422 14,422 - - Cash 112,941 112,941 - - 150,470 150,470 - - Cash and cash equivalents (c) 123,082 123,082 - - 164,892 164,892 - - Net debt (a - b - c) 494,277 (46,262) 439,926 100,613 544,523 (81,629) 520,391 105,761 5.7 Current and non-current provisions In thousand euros 1 st January 2017 Allowances Reversals of provisions used Reversals of provisions non used Changes in scope of consolidation and other reclassifications Exchange rates 30 June 2017 Provisions for litigation and other risks 6,471 65 (298) 0 (167) (449) 5,622 Provisions for other charges 12,421 691 (1,161) (9) 579 (313) 12,208 Provisions for retirements 28,029 1,440 (175) 12 (238) (914) 28,154 Total 46,921 2,196 (1,634) 3 174 (1,676) 45,984 o/w current provisions o/w non-current provisions 9,664 8,685 37,257 37,299 Provisions for litigation concern primarily commitments relating to legal disputes with employees. Provisions for other charges comprise commitments for rents above the market value or unoccupied premises, as well as tax and social security risks.
Page 23/33 5.8 Other current and non-current liabilities in thousand euros 30/06/2017 31/12/2016 < 1 an > 1 an Total < 1 an > 1 an Total Purchase price and earn-out payments (1) 2,075-2,075 2,150-2,150 Buy-out of minority interests (1) 13,007 18,825 31,832 20,771 20,952 41,723 Advances and progress payments from customers 15,868-15,868 17,947-17,947 Tax and social security liabilities 108,105-108,105 141,051-141,051 Deferred income (2) 10,251-10,251 10,867-10,867 Other debt and other liabilities 41,406 2,838 44,244 6,219 207 6,426 Total 190,713 21,663 212,376 199,005 21,159 220,164 (1) See comments in note 6.3.1. Acquisition-related commitments. (2) It concerns mainly studies on which invoicing exceeds revenue recognised using the percentage-of-completion method. 6 Cash flow and additional information 6.1 Changes in working capital requirement In thousand euros 30/06/2017 30/06/2016 31/12/2016 Decrease (Increase) in trade receivables 72,644 61,133 3,072 Increase (Decrease) in trade payables (23,527) (23,727) (709) Change in other receivables and payables (41,734) (11,215) 20,456 Change in the working capital requirement 7,383 26,191 22,819 6.2 Cash used by investing activities In thousand euros 30/06/2017 30/06/2016 31/12/2016 Acquisitions of intangibles assets (4,060) (4,262) (8,730) Acquisitions of property, plant and equipment (3,792) (4,052) (9,820) Total acquisitions during the period (7,853) (8,314) (18,550) Deferred disbursement 3 178 918 Payments made on acquisitions of intangible assets and property, plant and equipment (7,850) (8,136) (17,631)
Page 24/33 6.3 Off-balance sheet commitments 6.3.1 Acquisition-related commitments Commitments to buy out minority interests, deferred payments and earn-out payments that are discounted and recognised as non-current liabilities at June 30, 2017 break down as follows : In thousand euros 1year > 1 to 5 years > 5 years Total Deferred payments and earn-out payments Europe, Middle East and Africa America Asia Pacific 733 1,341 733 1,341 Sub-total 2,075 2,075 Commitments to buy out minority interests Europe, Middle East and Africa 1,751 2,878 4,629 America 53 15,946 15,999 Asia Pacific 11,203 11,203 Sub-total 13,007 18,825 31,831 TOTAL 15,081 18,825 33,906 6.3.2 Other commitments and litigation The Group is currently not involved in any significant litigation as of June 30, 2017. 6.4 Contingent liabilities In the normal course of business, there are risks in certain countries that the government may call into question the Company's tax or labour practices, which may result in a reassessment. The Group is involved in a number of tax inspections and labour claims in a number of countries. Provisions have been set aside for the probable risks identified (see note 5.7 Current and non-current provisions). The financial implications of these tax reassessments are accounted for by setting aside provisions for the amounts notified by the authorities and accepted by Ipsos' management. The reassessments are taken into account on a caseby-case basis based on estimates factoring in the risk that the validity of the measures and proceedings initiated by the Company may not be recognised. Ipsos' management believes that such reassessments in progress are unlikely to have a material impact on the Company's operating profit, financial condition or liquidity position. 6.5 Related-party transactions The related-party transactions are not significant as of June 30, 2017. 6.6 Risk factors There have been no significant developments in the risk factors described in the 2016 registration document in paragraph 4. Risk factors. 6.7 Subsequent events