Publicis Groupe: Full Year 2021 Results

Strong Q4 and record year on all KPIs

• Full year 2021 organic growth at +10% with Q4 at +9.3% ahead of expectations
• Epsilon and Publicis Sapient accretive to overall 2021 performance at +12.8% and +13.8% respectively
• Exceeding 2019 levels with +3% organic growth in 2021, accelerating to +5% in second half
• N°1 in new business league tables in 2021 for the 3^rd time in four years
• Industry-leading financial ratios, with operating margin rate at 17.5% and Free Cash Flow¹ at €1.4bn
• A bonus for all employees; an exceptional one-week additional salary for the 35,000 with no variable remuneration
• 2022 guidance: organic growth between +4% and +5%, c. 17.5% operating margin rate and c. €1.4bn FCF¹
• 2021 proposed dividend at €2.40 with a 47.8% payout, fully paid in cash

PARIS--(BUSINESS WIRE)--Regulatory News:

Publicis Groupe (Paris:PUB):

FY 2021 Results

Q4 2021 Revenue

Arthur Sadoun, Chairman and CEO of Publicis Groupe:

“In 2021, Publicis published record numbers and exceeded 2019 levels across all of its KPIs.

We delivered +10% full year organic growth, with Q4 at +9.3%, above expectations, and a strong performance across all of our regions.

Both Epsilon and Publicis Sapient were accretive to our full year growth, at +12.8% and +13.8% respectively, as we were in a position to capture the structural shifts in the industry towards first-party data management, digital media, commerce, and business transformation.

Looking at our performance on a two-year basis, we exceeded 2019 levels faster and more strongly than expected, at 3% growth for the full year that accelerated to 5% in the second half. The U.S., where our model is the most advanced, was a strong contributor to this performance, growing +8% versus 2019.

We also continued to post industry-leading financial ratios in 2021, with our operating margin rate at 17.5% and a free cash flow at 1.4 billion euros. With this, we are in a position to propose a dividend of 2.40 euros, corresponding to a payout of 47.8%.

2021 was a record year not just financially, but also commercially. For the third time in the past four years, we topped the New Business rankings as league tables placed us well-ahead of the pack, with landmark wins including Stellantis, Walmart, and Meta, to name just a few. We also started 2022 on a high note, with the win of McDonald’s U.S.

We are emerging from the pandemic as a stronger company, and a better one. The progress we have made across our Environmental, Social and Governance strategy is setting a clear industry standard. Our combined efforts on this front have led to Publicis topping the rankings for our sector with 8 out of 10 leading ESG ratings agencies.

I’d like to thank our clients for their partnership and everyone at Publicis for their dedication since the beginning of the crisis. In recognition of their outstanding efforts, everybody who has been with us for the past 24 months and beyond will receive a bonus this year. This includes the 35,000 who do not have any variable remuneration and will receive an additional week’s salary.

Now, when it comes to 2022, we have three clear priorities: leveraging our unique assets in data and technology for all of our clients; giving our people more opportunity to progress, with unprecedented experiences like Work Your World; and delivering growth that is both profitable and responsible.

Our overall dynamic, driven by the strength of our model and new business wins means that we aim to deliver organic growth between 4% and 5% in 2022, with an operating margin and free cash flow at the same record levels as in 2021, circa 17.5% and 1.4 billion euros respectively.”

Publicis Groupe’s Supervisory Board met on February 2, 2022, under the chairmanship of Maurice Lévy, to examine the 2021 annual accounts presented by Arthur Sadoun, CEO and Chairman of the Management Board.

KEY FIGURES

NET REVENUE IN FY 2021

Publicis Groupe’s net revenue for the full year 2021 was 10,487 million euros, up by 8.0% compared to 9,712 million euros in 2020. Exchange rate variations over the period have a negative impact of 191 million euros. Acquisitions (net of disposals) have a contribution of 18 million euros on net revenue.

Organic growth was +10.0% in FY 2021 compared to 2020. Compared to 2019, this implies organic growth of +3%, accelerating in H2 at +5% after +1% in H1. All regions continued to recover and posted strong growth.

2021 was a year of rebound after a year 2020 deeply impacted by the Covid-19 pandemic, but the Groupe was able to recover faster and more strongly than expected as its unique model allowed to capture the structural shifts in the industry towards first-party data management, digital media, commerce, and business transformation. This was particularly visible through the rise in organic growth at Publicis Sapient and Epsilon globally, at +13.8% and +12.8% respectively, both accretive to the Groupe performance.

Breakdown of FY 2021 net revenue by sector

^{Based on 3,574 clients representing 91% of the Groupe’s net revenue.}

Breakdown of FY 2021 net revenue by region

In North America, growth was +6.2% on a reported basis. On an organic basis, the region grew +9.7% versus 2020 (+7% compared to 2019). The U.S. was up +9.8% and Canada +6.1% organically.

Net revenue in Europe grew +11.2% on a reported basis and +9.6% on an organic basis (-4% compared to 2019). In this context, the United Kingdom posted organic growth of +4.9% in 2021. France was up +15.5% and Germany +7.7% on an organic basis. Excluding the impact of Publicis Groupe specific outdoor media activities and the Drugstore, organic growth was +11.7% in France and +8.6% in Europe.

Asia Pacific grew +11.4% on a reported basis and 10.3% on an organic basis (+3% compared to 2019). China organic growth was +10.3%.

The Middle East and Africa region was up +10.5% on a reported basis and +11.9% organically (-1% compared to 2019). In Latin America, reported growth at +5.7% while organic growth was +16.8% (+1% compared to 2019).

NET REVENUE IN Q4 2021

Publicis Groupe's net revenue in Q4 2021 was 2,935 million euros compared to 2,595 million euros in Q4 2020, up +13.1%. Exchange rate variations had an 81 million euros positive impact. The acquisitions (net of disposals) were a positive 10 million euros impact to net revenue in Q4 2021.

Organic growth was +9.3% in Q4 2021, ahead of the Groupe’s upgraded guidance in October. Organic growth compared to Q4 2019 was +5%.

Breakdown of Q4 2021 Net revenue by region

North America posted a +13.3% reported growth. The region grew +8.7% organically (+9% compared to Q4 2019). The U.S. grew in line with the region, at +8.7% organic, with Publicis Sapient at +22%, benefitting from both new business and expansion of existing clients. Media posted a good performance, both in traditional and digital, while creative activities continued to improve sequentially, with production business growing double-digit. Epsilon grew +6% despite lower activity related to U.S. car dealership business and despite a tough comparable base in Q4 2020. Publicis Health grew double-digit for the 7^th quarter in a row.

In Europe, Q4 reported growth was +12.0%. Organic growth was +8.7% (-1% compared to Q4 2019). The U.K. was up +6.5% organically, France +11.5% and Germany +5.0%. Excluding outdoor media activities and the Drugstore, France grew +4.1% and Europe grew +6.7%.

In Asia Pacific, organic growth was +9.2% (reported growth was +12.7%) and Q4 was flat compared to Q4 2019, driven by strong China business (+17.1%) and Publicis Sapient activities in Thailand and Australia.

Middle East and Africa grew +15.3% on an organic basis (+20.5% reported) thanks to strong Publicis Sapient expansion in the region. Latin America grew by 22.6% on an organic basis and +11.8% on a reported basis, driven by strong business in Brazil and Mexico.

ANALYSIS OF FY 2021 KEY FIGURES

Income Statement

EBITDA amounted to 2,317 million euros in 2021, compared to 2,158 million euros in 2020, up by 7.4%. EBITDA is 22.1% as a percentage of net revenue (compared to 22.2% in 2020).

• Personnel costs totaled 6,639 million euros in 2021, up by 6.4% from 6,242 million euros in 2020. As a percentage of net revenue, the personnel expenses represented 63.3% in 2021, compared to 64.3% in 2020. Fixed personnel costs were 5,729 million euros representing 54.6% of net revenue versus 56.2% in 2020. The cost of freelancers rose by 114 million euros in 2021, representing 392 million euros. Restructuring costs reached 53 million euros, significantly lower than 2022 levels at 175 million euros, as expected.

• Other operating costs (excluding depreciation & amortization) amounted to 2,782 million euros, compared to 2,388 million euros in 2020. This represents 26.5% of net revenue compared to 24.6% in 2020. This includes a rise in cost of sales for 129 million euros, mainly driven by the extension of a couple of large outdoor engagements for a short-term period. The related cost was 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 decreased by 21 million euros year-on-year versus 2020.

Depreciation and amortization expense was 477 million euros in 2021, down by 123 million euros compared to 2020. This decrease largely reflects the impact of the short-term contracts described above in other operating expenses.

The operating margin amounted to 1,840 million euros, up by 18.1% compared to 2020. This represents a margin rate of 17.5%, up by 150 basis points from 16.0% in 2020.

Operating margin rates were 19.9% in North America, 15.8% in Europe, 12.8% in Asia-Pacific, 12.3% in Latin America and 2.0% in the Middle East Africa region.

Amortization of intangibles arising from acquisitions totaled 256 million euro in 2021, down from 339 million euro in 2020. Impairment losses amounted to 122 million euros, essentially related to the real estate consolidation plan "All in One", which leads to a reduction in the number of sites, while allowing better collaboration between the teams. In 2020, impairment losses were 241 million euros (of which 226 million euros related to real estate plan “All in One”). In addition, net non-current income is negative at 28 million euros in 2021, compared to a positive of 5 million euros in 2020.

Operating income totalled 1,434 million euros in 2021, after 983 million euros in 2020.

The financial result, comprising the cost of net financial debt and other financial charges and income, is an expense of 118 million euros in 2021 compared to an expense of 198 million euros last year. The net expense on net financial debt was 85 million euros in 2021, including a 102 million euros interest expense on gross debt related to Epsilon’s and Sapient’s acquisitions. In 2020, it was a charge of 103 million euros (excluding a 16 million euro charge related to an anticipated unwinding of cross currency swaps). Other financial income and expenses in 2021 were a charge of 33 million euros, including 70 million euros of interest on lease obligations and other 42 million euros in income from the fair value remeasurement of Mutual Funds. Other financial income and expenses were a charge of 95 million euros in 2020, notably composed by 77 million euros interest on lease liabilities, and a 16 million euros charge related to an anticipated unwinding of cross currency swaps.

The revaluation of earn-out payments amounted to a gain of 27 million euros, compared to a loss of 17 million euros at end-2020.

The tax charge is 307 million euros, corresponding to an effective tax rate of 23.4% in 2021. This compared to 196 million euros in 2020 that corresponded to an effective tax rate of 24.7%.

The share in profit of associates was negligible and compared to a loss of 1 million euros in 2020.

Minority interests were an income of 9 million euros in Groupe results in 2021 compared to an loss of 5 million in the previous year.

Overall, net income attributable to the Groupe was 1,027 million euros as of December 31, 2021, compared to 576 million euros as of December 31, 2020.

Free Cash Flow

The Groupe’s free cash flow, before change in working capital requirements, equals to 1,427 million euros, up by 19.9% compared to 2020. Financial interest paid, which mostly include interests on the acquisition debt of Epsilon, amounts to 80 million euros, down by 33 million euros. Tax paid amounts to 362 million euros, rising by 69 million euros, compared to 293 million euros in 2020. Net investments in fixed assets amounts to 136 million euros, decreasing by 19 million euros compared to 155 million euros in 2020.

Net debt

Net financial debt amounted to 76 million euros as of December 31, 2021 compared to 833 million euros as of December 31, 2020. The Groupe's average net debt in 2021 amounted to 1,530 million euros compared to 3,286 million euros in 2020.

ACQUISITIONS AND DISPOSALS

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. The acquisition of CitrusAd was finalized on 1 September 2021. In a fast-growing retail media channel set to double in the next 5 years from c. $30bn annually already, this acquisition 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.

On July 9, 2021, Publicis Groupe finalised the acquisition of Boomerang in Benelux, boosting its dynamic creativity and content offering for local and global clients. Boomerang’s unparalleled skillset strengthens the Groupe’s global production model, in particular at Le Pub, and helps establishes a centre of global excellence for Dynamic Creativity, based in the Netherlands.

On December 15, 2021, Publicis announced the launch of SCB Tech X, a joint venture between Publicis Sapient and Siam Commercial Bank (SCB), creating one of the largest fintech entities in Southeast Asia. The joint venture, which will start out with 1,200 employees collectively, will be held 60% by SCB and 40% by Publicis Sapient. SCB Tech X is a true cloud native, industry-leading platform-as-a-service business that will serve clients throughout Southeast Asia, at a time when digital payments are predicted to exceed US$1 trillion in transaction value by 2025 in Southeast Asia. SCB Tech X provides not only innovative banking services (such as loan products and checking and savings accounts), but also non-banking services (such as food delivery, health and wellness content and online travel booking) to commercial institutions and consumers throughout the region.

In December 2021, Publicis Health finalised the acquisition of BBK Worldwide, a full-service R&D marketing firm and a global leader in clinical trial experience (CTE). BBK enables biotech and pharmaceutical customers to accelerate R&D programs, driving research forward through the unique integration of patient-centric services and proprietary technology, complementing Publicis Health’s existing CTE capabilities.

POST CLOSING EVENTS

On January 5, 2022, Publicis announced the acquisition of Tremend, one of the fastest-growing and largest independent software engineering companies in Central and Eastern Europe. Tremend currently reaches 60 million of its clients’ end users with its proven technology and will serve as the newest global delivery center for Publicis Sapient, expanding its Digital Business Transformation capabilities. Based in Bucharest, Romania, Tremend was founded in 2005 by Ioan Cocan and Marius Hanganu, and serves a large and diverse client base that includes companies such as Carrefour, ING and Orange. With over 16 years of experience in product engineering, Tremend has 650 strong software engineering talent across high demand skills. The transaction remains subject to customary approvals by the relevant competition authority.

OUTLOOK

For the full year 2022, the Groupe aims at delivering organic growth between 4% and 5%, assuming no major deterioration in the global health situation. This is a sequential improvement versus the two-year growth rate of 3% achieved in 2021, driven by the strength of the Groupe’s model and business wins, in a positive environment for advertising and business transformation. The Groupe anticipates Q1 2022 organic growth to be slightly above the full year guidance range, given a more favorable comparable base in Q1 last year.

The Groupe expects to reach in 2022 the same record levels achieved in 2021 for both its operating margin rate and free cash flow before change in working capital. This means an operating margin rate at circa 17.5% and free cash flow at circa 1.4 billion euros, while the Groupe continues to invest in talent and leverage its efficient structures to absorb the impact of inflation.

CASH ALLOCATION

Based on its strong operating and cash performance, the Groupe has set its cash allocation for 2022:

• Upgrade in the Groupe dividend policy to a 45% to 50% payout ratio versus circa 45% previously. For 2021, the Groupe will submit a €2.40 dividend per share (corresponding to a 47.8% payout) to the vote of its shareholders at its next AGM in May 2022.
• Removal of the scrip dividend option in order to stabilize the number of shares in circulation. As a consequence, 2021 dividend will be fully paid in cash.
• Step up in the bolt-on acquisition strategy, allocating between €400-600 million, versus €200-300 million in 2021, to continue strengthening data and tech capabilities.
• Continued deleveraging, with an objective of circa €1 billion average net debt in 2022.

ESG

The actions undertaken by the Groupe in terms of ESG are bearing fruit, as shown by the external ESG assessments, which have improved significantly: Publicis Groupe is the sector leader according to eight of the main agencies.

As the Covid-19 pandemic continued, protecting all Groupe employees by following the health instructions of each country remained the number one priority throughout the year. Depending on the local situation, the vast majority of the Groupe's employees remained in working-from-home mode, sometimes alternating with periods of return to the office. The offices remained partially open to allow meetings with clients when possible. Working from home is still used in many countries at the beginning of 2022.

The HR and Talent teams have continued to expand the employee support program, with more solutions to deal with physical and mental fatigue. These services use Employees' Assistance Programs (EAPs) that cover medical issues (free and facilitated consultation with doctors or specialists, etc.) and issues of well-being and fitness. The programs have been enhanced in several countries and remain accessible to all employees (for themselves and their families). Particular attention has been paid to mental health in order to help employees suffering from isolation, in all countries.

As an extension of the work carried out in 2020 on the Future of Work, and in response to the needs as expressed by our teams, the Groupe has launched its internal Work Your World program, which is operational from the beginning of 2022. Employees are given the opportunity to work for six weeks in a country or city of their choice where the Groupe has offices, giving them a new cultural experience. Work Your World has been very well received by the teams.

In terms of training, new programs conducted with partners and third-party experts have been added to the Marcel Classes catalog, with more than 30,000 modules available online 7/7. Marcel has played a key role in supporting employees, with the platform now hosting several dynamic internal communities.

For the second year in a row, the Viva La Difference internal seminar brought together virtually all the Groupe's employees in December 2021 to take stock of this singular year and to look ahead to 2022. More than 40,000 employees logged on to follow the 3 days on Marcel, with live sessions from Paris and New York. The seminar was an opportunity to discuss various topics, including the Groupe's ESG challenges, with a particular focus as in 2020 on diversity, equity and inclusion issues. The beginnings of the Once & For All Coalition focusing on media in favour of underrepresented population groups were presented. Projects that reduce the carbon footprint of client projects or help clients better manage their environmental impacts were shared.

Publicis Groupe
Delphine Stricker
Corporate Communications
+33 (0)6 38 81 40 00
delphine.stricker@publicisgroupe.com

Alessandra Girolami
Investor Relations
+33 (0)1 44 43 77 88
alessandra.girolami@publicisgroupe.com

Clémence Vermersch
Investor Relations
+33 (0)1 44 43 72 17
clemence.vermersch@publicisgroupe.com