Ipsos Group report continued growth in 2008 supported by strong UK performance

Supported by a strong performance from Ipsos in the UK, Ipsos Group has published its 2008 results showing organic growth of 7.8% and an operating margin of 10%.

Ipsos's turnover grew to £128.1 million in 2008 up 11% from its 2007 results.

Despite the backdrop of a global recession Ipsos outperformed the market in 2008 and expects to continue to do so in 2009.

Ipsos Chief Executive Mike Everett commented on the results saying:

"Ipsos's emphasis on high quality, expert research helped us out-perform other prominent research organisations and support Ipsos Group's continued growth   "In 2009, Ipsos will continue to provide companies with the information they need to prosper in these difficult times. " 

Chairman of the Ipsos Social Research Institute Ben Page said:

"Our success in 2008 reflects our absolute commitment to focusing on a broad spread of sectors, our investment in great talent, and our willingness to go the extra mile for clients, things we will need to do even more of in 2009" I

Ipsos Group results:

Strong earnings increase

In millions of euros	2008	2007	Growth
Revenue	979.3	927.2	+5.6%
Gross profit Gross margin	602.5 61.5%	561.5 60.6%	+7.3%
Operating margin Operating margin/revenue Operating margin/gross profit	98.1 10.0% 16.3%	90.6 9.8% 16.1%	+8.2%
Net profit (attributable to the Group)	51.5	46.5	+10.8%
Adjusted net profit (attributable to the Group)	61.0	56.9	+7.4%

*Adjusted net profit is calculated before non-cash items linked to IFRS 2 (share-based payments), the amortisation of acquisition-related intangible assets (client relationships), deferred tax related to goodwill on which amortisation is tax-deductible in certain countries, and other non-recurring income and expenses. 

Profitability. Gross profit, which is calculated by deducting external direct variable costs attributable to the performance of contracts from revenue, continued to improve, moving up to 61.5% of revenue from 60.6% in the previous year. This reflects teams' ability to maintain healthy pricing levels, as well as the positive effects of the continued switchover to online research, notably in Europe, where internet-based data gathering increased by 20%.

The operating margin grew at a more rapid rate than revenue and gross profit thanks to tight control of general operating expenses. It stood at 10.0% of consolidated revenue, i.e. 20 basis points higher than in 2007.

Amortisation of acquisition-related intangible assets. A portion of the goodwill relating principally to MORI was allocated to client relationships during the 12-month period following the acquisition, and amortisation charges will be recognised in the income statement over several years, in accordance with IFRSs. This charge came to €1 million in 2008.

Other non-recurring income and expenses. The balance of this item, which comprises unusual and specifically designated costs, was a net expense of €1.2 million compared to €2.6 million in 2007. During 2007, the main component of this item was a non-recurring charge of €1.9 million recorded in Brazil related to the finalisation of a sales tax matter. During 2008, Ipsos posted a non-recurring gain of £1 million following the WPP group's decision not to exercise its put option on TNS' TV audience metrics assets. Conversely, various non-recurring expenses were also recognised, including €1.4 million in legal fees linked to the conclusion of a dispute between Ipsos and Arbitron.

Finance costs. Finance costs rose 8% to €12.3 million from €11.3 million in 2007 owing to the increase in average debt. Other financial income and expense reflected €1.9 million in net foreign exchange losses, an increase on the €0.4 million recorded in 2007.

Tax. The effective tax rate on the IFRS income statement was 29.5%, down from 31% in 2007, in line with the global average of statutory tax rates, which are tending to decline. As in the past, the effective tax rate included a deferred tax liability cancelling 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. The tax rate actually paid by Ipsos was 24% in 2006, 18% in 2007 and 26% in 2008. It is expected to remain below 30% over the next few years.

Net profit attributable to the Group posted a significant improvement of 10.8% to €51.5 million, with adjusted net profit reaching €61.0 million. Adjusted earnings per share came to €1.90.

Dividends. To enable shareholders to share in the Group's success to an even greater extent, the Board of Directors is set to propose payment of a dividend of €0.50 per share at the Annual General Meeting, up 25% on the previous year and due to be paid out on 2 July 2009. This represents a payout of 26% of adjusted net profit and a return for shareholders in line with practice at top-performing companies.

Financial structure - Shareholders' equity stood at €450 million, while its net debt came to €212 million at 31 December 2008, making for a debt/equity ratio of 47%, well below the upper limit of 100% Ipsos has set itself.

Cash flow increased by 6.8% in line with the improvement in the Group's profitability, but was offset by the increase in tax expense actually paid, albeit from the unusually low level recorded in 2007.

Healthy cash generation over the 12-month period helped to finance €70 million in selective acquisitions, including two US companies Forward Research (marketing research) and Monroe Mendelsohn (media research), as well as Livra (online research) and Alfacom (loyalty research) in Latin America, B-Thinking in China and Strategic Puls, the leader in the Balkans.

In addition, Ipsos continued to pursue its share buyback programme in order to curb the dilutive impact of its bonus share allotment plans giving employees to access to the share capital. In all, 457,017 shares were purchased in the market at a cost of €8.8 million during the first quarter of 2008, before being cancelled. Accordingly, the number of shares outstanding at 31 December 2008 was 32,166,188, after deducting treasury shares.

Cash amounted to €92 million at 31 December 2008, giving Ipsos a high level of financial flexibility, notably to pursue its policy of acquisitions (see the press release issued today on the acquisition of Punto de Vista in Chile).

Outlook

The first few months of the year have been turbulent. Numerous sectors have embarked on a strategy of major restructuring and, to an even greater extent, most businesses have had to make changes to their plans.

A number of research programmes have been pruned back, postponed or even cancelled, especially those with long-term objectives.

On the other hand, other programmes helping to guide and control operations on a day-today basis have been or are currently being scaled up. The return of more strategic research, or in any event research intended to draw up new action plans, will come at a later stage, probably during the second half of 2009.

In any case, decisions are being made more slowly than previously and the pricing pressures are significant. Ipsos is well-protected against these negative trends owing to:

• its global presence, which puts it in a position to compete for a growing number of global mandates, themselves the result of clients' desire to work with a limited number of suppliers capable of delivering consistent services around the world;
• the quality of the commitment and expertise of its teams, the product of its organisation into specialised business lines, and its status as an independent business controlled and run by professionals;
• its relationships with its clients, and first and foremost with the large accounts run via its various centrally defined programmes, including Global PartneRing covering 17 clients, together accounting for over 25% of the company's revenues;
• its reputation, which has grown stronger over the years and has made Ipsos a business for which many industry professionals would like to work;
• its policy of developing new products and services, which will make another key contribution to its business activities during 2009;
• the power and quality of its resources, which enable it to survey every year more than 10 million people in over 100 countries and to execute over 70,000 contracts.

For 2009, Ipsos forecasts organic growth below its historic average but nonetheless in positive territory and above the market average.

The operating margin is expected to hold up at the record level achieved in 2008 thanks to tight cost control, which will protect Ipsos' ability to develop its range of products and services and to manage its relationship with its clients.

New companies will join Ipsos and provide it with the benefit of their specific expertise and resources. The acquisition of Punto de Vista in Chile represents the first step this year.

Looking beyond 2009, Ipsos is very confident about trends in the sector for services based on People Insights. As in the past, it possesses all the key strengths it needs to be an innovative major player drawing on firmly entrenched ethical and professional values.

Ipsos Group published their results for 2008 on Wednesday 18 March 2009. Full details of the results are available on the Ipsos website: http://www.ipsos.com/